MediaTek Inc. | 2014 Annual Report 2
Contact Information
Spokesperson:
Name: David Ku
Title: Chief Financial Officer
TEL: +886 (0)3-567-0766
Fax: +886 (0)3-578-7610
Email: [email protected]
Deputy Spokesperson:
Name: Jane Chen
Title: Director, Financial Division
TEL: +886 (0)3-567-0766
Fax: +886 (0)3-578-7610
Email: [email protected]
MediaTek Inc. Headquarters:
Address: No. 1, Dusing Rd. 1, Hsinchu Science Park, Hsinchu, Taiwan, R.O.C., 300
TEL: +886 (0)3-567-0766
MediaTek Inc. Taipei Office:
Address: No. 15, Lane 91, Sec. 1, Neihu Rd., Neihu District, Taipei, Taiwan, R.O.C., 114
TEL: +886 (0)2-2659-8088
Transfer Agent:
Company: Chinatrust Commercial Bank, Corporate Trust Service Department
Address: 5F, No. 83, Chungching S. Rd., Sec. 1, Taipei, Taiwan, R.O.C.
Website: http://ecorp.ctbcbank.com/cts/index.jsp
TEL: +886-(0)2-6636-5566
Independent Auditor:
Company: Ernst & Young
Auditors: Shao-Pin Kuo, Chih-Lai Wang
Address: 9F, No.333, Keelung Rd., Sec. 1, Taipei, Taiwan, R.O.C.
TEL: +886-(0)2-2757-8888
Website: http://www.ey.com
MediaTek Inc. Website:
Website: http://www.mediatek.com
MediaTek Inc. | 2014 Annual Report 3
2014 MediaTek Annual Report
Table of Contents
I. Letter to Shareholders .................................................................................................................................................................. 5
II. Company Profile .............................................................................................................................................................................. 7
1. MediaTek Company Profile........................................................................................................................................ 7
2. Milestones .......................................................................................................................................................................... 7
III. Corporate Governance................................................................................................................................................................ 11
1. Organization ..................................................................................................................................................................... 11
2. Directors and Supervisors ....................................................................................................................................... 13
3. Management Team ..................................................................................................................................................... 19
4. Corporate Governance Report ............................................................................................................................. 22
5. .................................................................. 39
6. Net Changes in Shareholding .............................................................................................................................. 40
7. Top 10 Shareholders Who are Related Parties to Each Other ............................................................ 41
8. Long-Term Investment Ownership .................................................................................................................... 41
IV. Capital and Shares ..................................................................................................................................................................... 42
1. Capital and Shares ...................................................................................................................................................... 42
2. Status of Corporate Bonds ................................................................................................................................... 46
3. Status of Preferred Stocks .................................................................................................................................... 46
4. Status of GDR/ADR .................................................................................................................................................... 46
5. Status of Employee Stock Option Plan .......................................................................................................... 47
6. Status of New Employees Restricted Stock Issuance: ......................................................................... 48
7. Status of New Shares Issuance in Connection with Mergers and Acquisitions ...................... 49
8. Financing Plans and Implementation ............................................................................................................ 50
V. Business Activities ....................................................................................................................................................................... 51
1. Business Scope .............................................................................................................................................................. 51
2. Market, Production, and Sales Outlook .......................................................................................................... 57
3. Employees ....................................................................................................................................................................... 63
4. Important Contracts ................................................................................................................................................. 64
VI. Corporate Social Responsibility .......................................................................................................................................... 66
MediaTek Inc. | 2014 Annual Report 4
1. Corporate Promise ......................................................................................................................................................66
2. Social Participation ....................................................................................................................................................69
3. Environmental Efforts.............................................................................................................................................. 72
VII. Financial Status, Operating Results and Status of Risk Management ........................................................... 75
1. Financial Status ........................................................................................................................................................... 75
2. Operating Results ....................................................................................................................................................... 77
3. Cash Flow Analysis ..................................................................................................................................................... 79
4. Major Capital Expenditure ..................................................................................................................................... 80
5. Investment Policies ................................................................................................................................................... 80
6. Risk Management ........................................................................................................................................................81
7. Other Material Events.............................................................................................................................................. 86
VIII. Special Disclosure ................................................................................................................................................................... 87
1. Summary of Affliated Companies ..................................................................................................................... 87
2. Private Placement Securities .............................................................................................................................. 101
3. Holding or Disposition of MediaTek Stocks by Subsidiaries .............................................................. 102
4.
Stated in Item 2 Paragraph 2 of Article 36 of Securities and Exchange Law of Taiwan .............. 102
5. Other Necessary Supplement............................................................................................................................ 102
IX. Financial Information ............................................................................................................................................................. 103
1. Condensed Balance Sheets ................................................................................................................................ 103
2. Condensed Statements of Comprehensive Income / Statements of Income ....................... 106
3. from 2010 to 2014 ........................................................................................................... 107
4. Five-Year Financial Analysis ............................................................................................................................... 108
5. .................................................................................................................................. 113
6. Financial Statements and Ind MediaTek & Subsidiaries (Page
F1 - Page F95)........................................................................................................................................................................... 114
7. Parent Company (Page F96 -
Page F174) .................................................................................................................................................................................. 114
8. its
Affiliates have Financial Difficulties .......................................................................................................................... 115
MediaTek Inc. | 2014 Annual Report 5
I. Letter to Shareholders
Dear Shareholders:
2014 is a year of asset expansion and growth for MediaTek with both revenue and net
profit achieving record-highs. On February 1st, MediaTek officially merged with MStar
and achieved full year consolidated net revenues of NT $213.1 billion, a substantial
growth of 56.6% over the previous year. The consolidated operating margin was
48.8%, an increase of 4.8 percentage points over last year. The consolidated net
income reached NT$46.4 billion, up 68.8% year-over-year, with an after-tax net profit
margin of 21.8%. The consolidated earnings per share was NT $ 30.04.
As a result of diligent efforts from MediaTek employees for the last 3 years, revenue
contribution from smartphones has risen close to 50%. Paced closely along market
trends such as the fast-changing smartphone features and technologies, the rapid
migration to LTE in Mainland China, and the massive growth in emerging markets,
MediaTek continuously introduced highly competitive solutions to enable customer
success in a highly competitive market. For -Core
series were highly recognized by consumers and has become the standard of high-
end phones and tablets. In addition, LTE solutions started commercial production in
the second quarter last year, supporting TDD/FDD-LTE, WCDMA, TD-SCDMA and GSM.
By obtaining a number of LTE certifications from operators in Mainland China and
Europe and upgrading to 64 bit CPUs for all SoCs, MediaTek continued its innovations
and leadership in advanced specifications, and also launched the world's first HDTV
SoC supporting HEVC 4K, a new wearable device platform- LinkIt, multimode wireless
charging chip, and multiple wireless communication solutions designed for Internet
of Things and Smart Home.
With the rise of the global middle class, MediaTek believes that advanced specified
and reasonably priced products will enable the company to expand its businesses to
the entire world and consumers to use technology to create endless possibilities
(Everyday Genius). MediaTek has started well in expanding to international markets,
such as partnering with Google on Android One phone, leading the industry to launch
Android TV, Google cast for audio, and Android Wear solutions. In addition, Amazon
became a tablet customer and a number of international smartphone brands have
strengthened cooperation with MediaTek. With a increasingly competitive LTE
product portfolio, we believe MediaTek can explore more market opportunities.
Moreover, MediaTek received a number of international honors. For the second
consecutive year and the only business leader from Taiwan, chairman Mr. Ming-Kai
Tsai was elected "The Best-Performing CEOs in the World" by Harvard Business
-
Pacific Semicon
Alliance), which is committed to promote the fabless industry. MediaTek also was
MediaTek Inc. | 2014 Annual Report 6
listed in the IHS ranking of the world's top ten semiconductor fabless company for
the first time. Furthermore, MediaTek published five research papers in the ISSCC,
which set the record as the only Taiwanese company to be selected for 12
me.
MediaTek firmly believes that technology leadership is the only way to succeed. On
top of talents from MStar merger, MediaTek established new offices in Finland, San
Diego, and India last year and are recruiting top talents in 27 offices around the world.
In addition to develop existing businesses, MediaTek will proactively pursue new
opportunities by innovating in Internet of Things, wearables, automotive electronics
and other fields, and investing in leading manufacturing processes, advanced
technology, and new markets. Last but not least, we would like to thank you - our
shareholders - for your continuous support and belief in our efforts. MediaTek will
continue to plan for future growth and deliver more shareholder values.
Chairperson: Ming-Kai Tsai
President: Ching-Jiang Hsieh
MediaTek Inc. | 2014 Annual Report 7
II. Company Profile
1. MediaTek Company Profile
MediaTek Inc. was founded on May 28, 1997 and listed on the Taiwan Stock Exchange (TSE) in July 2001. The
company is headquartered in Taiwan, with sales and research subsidiaries in Singapore, Mainland China,
India, US, Japan, Korea, Denmark, England, Finland, Sweden and Dubai.
MediaTek Inc. provides innovative system-on-chip solutions in the following areas: optical storage
solutions, digital home solutions (such as digital TV, DVD players, and Blu-Ray related products), and
mobile communication solutions. The Company is the only IC design firm in the world that delivers IC
solutions across computer technology, consumer electronics, and wireless communication fields.
MediaTek Inc. is one of the top 3 IC design companies in the world. As an industry leader committed to
constant innovations, MediaTek pioneered the development of the world's first true octa-core LTE
smartphone platform, which demonstrates its leadership in the global semiconductor supply chain, in
particular in the wireless communication field.
2. Milestones
Year Milestones
2015
Published 5 papers in ISSCC, and hit a new record of papers selected by ISSCC for twelve consecutive years among
Taiwan companies-- 「A Highly Integrated Smartphone SoC Featuring a 2.5GHz Octa-Core CPU with Advanced High-
Performance and Low-Power Techniques」、「An LTE SAW-less Transmitter Using 33% Duty-Cycle LO Signals for
Harmonic Suppression」、「A Wideband Fractional-N Ring PLL Using a Near-Ground Pre-Distorted Switched-Capacitor
Loop Filter」、「A 4.5mW CT Self-Coupled rΣ Modulator with 2.2MHz BW and 90.4dB SNDR Using Residual ELD
Compensation」、「A 0.5nJ/Pixel 4K H.265/HEVC Codec LSI for Multi-format Smartphone Applications」
2014
-
consecutive years
Mr. Ming-Kai Tsai, Chairman of MediaTek Inc., is honored by Harvard Business Review as one of "The Best-Performing
CEOs in the World" for two consecutive years, and is the only leader from Taiwan on this list
Awarded "2014 Most Admired Company in Taiwan Top 3" by "CommonWealth Magazine"
Productivity Center and Boston Consulting Group
Published 8 papers in ISSCC, not only ranked no.1 in Taiwan, but also a record high for the semiconductor industry --
「Heterogeneous Multi-Processing Quad-core CPU and Dual-GPU design for optimal Performance, Power and Thermal
MediaTek Inc. | 2014 Annual Report 8
Year Milestones
tradeoffs in a 28nm Mobile Application Processor 」、「A Digitally Assisted Self-Calibrating NFC SoC with a Triple-Mode
Reconfigurable PLL and a Single-Path PICC-PCD Receiver in 110nm CMOS」、「A 2.4GHz ADPLL with Digital-Regulated
Supply Noise Insensitive and Temperature Self-Compensated Ring DCO」、「A 1.89nW/0.15V self-charged XO for real-
time clock generation.」、「A Multi-band Inductor-less SAW-less 2G/3G Cellular Receiver in 40nm CMOS」、「A 2.667
Gb/s DDR3 Memory Interface with Asymmetric ODT on Wirebond Package and Single-Side Mounted PCB」、「A
0.29mm2 Frequency Synthesizer in 40nm CMOS with 0.19ps RMS Jitter and <-100dBc Reference Spur for 802.11ac」、
「Cloud 2.0 Clients and Connectivity 40nm CMOS with 0.19ps RMges」
2013
Asia-
Alliance)
list
Mr. Ming-Kai Tsai, Chairman & CEO of MediaTek Inc., was named in "The Best-Performing CEOs in the World" by Harvard
Business Review
Selected as a test bed for the Wi-Fi Alliance's Wi-
Awarded "2013 Most Admired Company in Taiwan Top 3" by "CommonWealth Magazine"
Published 6 papers in ISSCC, the most among Taiwan technology companies --「A Wideband Fractional-N Ring PLL
with Fractional Suppression using Spectrally Shaped Segmentation」、「A 0.27mm2, 13.5dBm, 2.4GHz All-digital Polar
Transmitter with 34%-Efficiency Class-D DPA in 40nm CMOS」、「An AC-Coupled Hybrid Envelope Modulator for
HSUPA Transmitters with 80% Modulator Efficiency」、「A 24.7dBm All-Digital RF Transmitter for Multimode
Broadband Applications in 40nm CMOS」、「A 28fj/conv-step CT Modulator with 78dB DR and 18MHz BW in 28nm
CMOS Using a Highly Digital Multibit Quantizer」and「A Universal GNSS (GPS/Galileo/Glonass/Beidou) SoC 10:15 AM
with a 0.25mm2 Radio in 40nm CMOS」
2012
MediaTek Android smartphone platform included in the Wi-Fi CERTIFIED Passpoint
mobile benchmark platform
Ralink Technology, a wholly owned subsidiary of MediaTekInc, was selected to be in the Wi-Fi CERTIFIED WMM® -
Admission Control test bed as the benchmark for advanced Wi-Fi performance and interoperability
2012 SIPA Innovative Product Award, MT6620 Highly Integrated WiFi/BT/FM/GPS 4-in-1 SOC
-
Alliance)
Boston Consulting Group
2012 Thomson Reuters Taiwan Innovation Awards : Top 5 Corporate Innovators in Taiwan
Awarded "2012 Most Admired Company in Taiwan Top 3" by "Common Wealth Magazine"
Awarded "2012 INFO TECH TOP 100 in Asia" by "Business Next" magazine
Awarded 6th National Telecom Award 2012
Mr. Ming-Kai Tsai, Chairman & CEO of MediaTekInc, awarded "Academician of ITRI (Industrial Technology Research
Institute), R.O.C."
Mr. Ming- -
Business Review
MediaTek papers selected for presentation at 2012 Symposium on VLSI Circuits- the only fabless semiconductor
company to have more than two papers selected for presentation at the 2012 Symposium
Published papers in ISSCC -in-1 (WiFi/BT/FM/GPS) Connectivity SoC with Enhanced Co-Existence Performance in
-Output Single-Inductor DC-DC Buck Converter Delivering 1.2W/mm2 in
MediaTek Inc. | 2014 Annual Report 9
Year Milestones
2011
-integrated 3D/Internet TV SoC)
Awarded To
Published five research papers in the ISSCC -Locked Ring PLL with Self-
70Mb/s -100.5dBm Sensitivity 65nm IP MIMO Chipset for -Less
Phones with Inductorless Front- -Band Blocker
2010
Affairs
-
- ess Week
Awarded "2010 Corporate Social Responsibility Top 65" by Global Views Monthly
-on-
Published research papers in the ISSCC mplifier
2009
-based Industrial Park
Administration (SIPA)
Magazine
Magazine
BW 0.084mm2 CT ΔΣ ADC with -97.7dBc THD and 80dB DR Using Low-Latency DEMCommonWealthMagazineb/s HDMI
Receiver with Adaptive Loop Updating “A 110nm RFCMOS GPS SoC with
34mW -
2008
-HD ATSC DTV SoC, by Science-based Industrial Park
Administration (SIPA)
Launched Blu-ray DVD player chipset, GSM/GPRS/EDGE handset baseband chip, and next-generation ATSC and DVB-T
digital TV single-chip
by Global View Magazine
Published seven research papers in the ISSCC
r Free All-Digital PLL with Loop Gain Calibration and Phase Noise Cancellation for
2007
Launched high-performance GPS signal receiver single-chip, first generation Bluetooth chip, and next-generation 120Hz
video processing chip
orbes Asia
MediaTek Inc. | 2014 Annual Report 10
Year Milestones
Published research paper in the ISSCC -based Clock recovery architecture with all-digital duty-
Evaluation Method for Overdrive Voltage Circuit App
2006
-ray DVD player chipset, by SIPA
Launched GSM/GPRS/EDGE high-resolution camcorder chipset for mobile phones
Published research paper in the ISSCC -
2005
Launched ATSC and DVB-T high-resolution LCD TV chipset
Published research papers in the ISSCC -Format Read/Write SoC for 7x Blu- -Based
2004
-Recorder Backend single-chip, by SIPA
Launched GSM/GPRS baseband handset chips
Ranked no.3 in the high-
2003
-read/write (DVD-R/W) optical storage chipset, by SIPA
Launched DVD-Dual chipset
Awarded Top High-Tech Company in Taiwan by
2002
-speed COMBI optical storage chipset by SIPA
Launched 48x CD-R/W chipset
Launched CD/DVD COMBI chipset
2001
high-integration DVD-Player chipset by SIPA
Awarded the 9th annual MOEA Award for Industrial Technology Advancement
2000 -speed CD-R/RW chipset by SIPA
Launched 12x DVD-ROM chipset
1999 -ROM chipset by SIPA
Launched 12-x DVD-ROM chipset
1998 -ROM digital data/servo processor by SIPA
Launched the highest performance 48x CD-ROM chipset in the world
1997 Founded on May 28th
MediaTek Inc. | 2014 Annual Report 11
III. Corporate Governance
1. Organization
1.1. Organization Chart
As of April 30, 2015
Shareholders
The Board
Supervisors
Audit Division
Executive Office
Business UnitTechnology
Development
Corporate Sales &
Marketing
Corporate
Operations
Corporate Sales
Strategy
Development
Corporate Strategy &
New Business Development
Wireless
Communications
Wireless Connectivity
& Networking
Wireless Wearable
Data Center
Networking
Corporate
Technology
Communication
System & Multimedia
RF/Analog Design &
Circuit Technology
High-Performance
Processors
Design Technology
Corporate Marketing
Manufacturing &
Process Technology Development
Information
Technology
Legal & Intellectual
Property
Finance
Human Resources
Home Entertainment
MediaTek Inc. | 2014 Annual Report 12
1.2. Major Corporate Functions
Department Functions
Wireless Communications Research, design and promotion of mobile communication chips
Wireless Connectivity & Networking Research, design and promotion of wireless local area network
(LAN) and personal area network (PAN) chips
Wireless Wearable Research, design and promotion of wireless wearable device
chips
Home Entertainment Research, design and promotion of digital consumer and digital
TV chips
Data Center Networking Research, design and promotion of data center networking
related chips
Corporate Technology Advanced technology development and industry/academy
collaboration management
Communication System and Multimedia Research and design of communication system architecture and
multimedia technologies for video and imaging applications
RF / Analog Design and Circuit
Technology
Analog technology development for wireless communication
field, including RF, audio/video, transmission interface, server
and power; packaging and circuit board design
High-Performance Processors Strategy, development and applications of high-performance
processors
Design Technology Design services and development of technology platforms
Corporate Sales Product sales, customer development, client relationship
management, and sales operation management etc.
Corporate Marketing Corporate image, industry value chain partnerships, market
surveys and promotion communications
Manufacturing & Process Technology Development Pilot production of R&D products, technology development,
quality and reliability management, service satisfaction
management, production planning and procurement affairs.
Advanced process development, pilot production of high-end
products and technological development of components
Information Technology Information system architecture, e-commerce strategy,
information system development and operation
Legal & Intellectual Property Corporate legal affairs, contracts, patents, and other intellectual
property management
Finance Finance and accounting, tax, treasury and asset management,
strategic investments, and investor relations
Human Resources Human resource management and organization development,
general affairs, plant administration, and labor safety
Corporate Strategy & New Business Development Corporate strategy analysis, development, and execution.
Assessment and assurance of new market opportunities
Audit Division Internal audit and operational procedure management
MediaTek Inc. | 2014 Annual Report 13
2. Directors and Supervisors
2.1. Information Regarding Board Members & Supervisors
As of April 30, 2015 / Unit: Shares Title/Name Nationality
or Registry
Date
Elected
Term
(Yrs)
Date
First
Elected
Shareholding
when Elected
Current
Shareholding
Spouse & Minor
Shareholding
Selected Education & Past Positions Current Positions at MediaTek and Other
Companies
Shares % Shares % Shares %
Chairman
Ming-Kai Tsai R.O.C
June 13,
2012 3
May 21,
1997 40,873,162 3.56% 41,006,187 2.61% 46,351,145 2.95%
- Master, Electrical Engineering, University of
Cincinnati, USA
- President of the 2nd Business Group, UMC
- CEO, MediaTek, Inc.
- Chairman, Andes Technology and JMicro Technology
Vice Chairman
Jyh-Jer Cho R.O.C
June 13,
2012 3
May 21,
1997 30,281,447 2.64% 30,325,222 1.93% 10,784,414 0.69%
- Master, Electronics Engineering, National
Chiao Tung University
- Manager, Multimedia R&D Team, UMC
None
Director
Ching-Jiang Hsieh R.O.C
June 13,
2012 3
June 13,
2005 4,203,271 0.37% 4,004,921 0.25% 1,469,489 0.09%
- Master, Electrical Engineering, National
Taiwan
University
- Engineer, Multimedia R&D Team, UMC
- President, MediaTek, Inc.
-
Director
Cheng-Yaw Sun R.O.C
June 13,
2012 3
June 13,
2012 49,244 0.00% 29,244 0.00% - -
- B.S., Chung Yuan Christian University of
Taiwan
- Managing Director, HP China
None
Director
Kenneth Kin R.O.C
June 13,
2012 3
June 13,
2012 - - - - - -
- Ph.D., Nuclear Engineering and Applied
Physics, Columbia University, USA
- Senior VP, Worldwide Sales & Services, TSMC
- Independent director, eMemory Technology Inc.,
AzureWave Technologies Inc., Vanguard International
Semiconductor Corp. and Hermes Microvision, Inc.
- Vice Dean, College of Technology Management,
National Tsing Hua University
Independent Director
Chung-Yu Wu R.O.C
June 13,
2012 3
June 13,
2012 - - - - 891,118 0.06%
- Ph.D., Electronics Engineering, National Chiao
Tung University
- President, National Chiao Tung University
- Independent director / remuneration committee
member/audit committee member, Global Unichip Corp.
-Independent director / remuneration committee
member, Leadtrend Technology Corp and Amazing
Microelectronics Corp.
- Chair Professor, Electronics Engineering, National Chiao
Tung University
- Principal Investigator Biomedical Electronics
Translational Research Center
Independent Director
Peng-Heng Chang R.O.C / U.S.A
June 13,
2012 3
June 13,
2012 - - - - - -
- Ph.D., Materials Engineering, Purdue
University
- VP, Human Resources / Materials
Management & Risk Management, TSMC
- President & CEO, Motech Industries Inc.
MediaTek Inc. | 2014 Annual Report 14
Title/Name Nationality
or Registry
Date
Elected
Term
(Yrs)
Date
First
Elected
Shareholding
when Elected
Current
Shareholding
Spouse & Minor
Shareholding
Selected Education & Past Positions Current Positions at MediaTek and Other
Companies
Supervisor
MediaTek Capital Co.
Representative: Chung-
Lang Liu
R.O.C June 13,
2012 3
June 21,
2006 7,794,085 0.68% 7,794,085 0.50% - -
- Ph.D., Electrical Engneering, , MIT, USA
- President, National Tsing Hua University
- Chairman, Dramexchange Technology Inc.
- Independent Director, Richtek Technology Corp., United
Microelectronics Corp., and Powerchip Technology Corp.
- Director, Macronix Intl. Co. Ltd
- Supervisor, Andes Technology Corp.
Supervisor
National Taiwan
University
Representative:
Ruey-Shan Guo
R.O.C June 13,
2012 3
June 13,
2012 2,873 0.00% 2,873 0.00% - - - Ph.D. Mechanical Engineering, MIT, USA
- Dean and professor, National Taiwan University College
of Management
Supervisor
Paul Wang R.O.C
June 13,
2012 3
June 13,
2012 - - - - - -
- Ph.D., Physics, Carnegie-Mellon, USA
- Senior Consultant of IBM, USA
- Chairman of Pacific Venture Group and SerComm Corp.
- Director Taiwan Prosperity Chemical Corp,, Prosperity
Dielectrics Co., Ltd. (PDC) and Taiwan Cement.
- Independent Director, UPC Technology Corporation
- President, Monte Jade Science and Technology
Association
2.2. Major Shareholders of Important Institutional Shareholders
MediaTek Capital Co. is 100% owned by Hsu-Ta Investment Co., which is 100% owned by MediaTek Inc.
MediaTek Inc. | 2014 Annual Report 15
2.3. Professional qualifications and independence analysis of directors and supervisors
Meet One of the Following Professional Qualification Requirements, Together
with at Least Five Years Work Experience
Name/
Criteria
An instructor or higher
position in a department
of commerce, law,
finance, accounting, or
other academic
department related to
the business needs of
the company in a public
or private junior college,
college or university
A judge, public prosecutor,
attorney, certified public
accountant, or other
professional or technical
specialists who has passed
a national examination and
been awarded a certificate
in a profession necessary
for the business of the
company
Have work experience
in the area of
commerce, law,
finance, or accounting,
or otherwise necessary
for the business of the
company
Independence Criteria (Note)
Number of other public
companies concurrently
serving as an independent
director 1 2 3 4 5 6 7 8 9 10
Ming-Kai Tsai √ √ √ √ √ √ √ √ 0
Jyh-Jer Cho √ √ √ √ √ √ √ √ 0
Ching-Jiang Hsieh √ √ √ √ √ √ √ √ √ 0
Cheng-Yaw Sun √ √ √ √ √ √ √ √ √ √ 0
Kenneth Kin √ √ √ √ √ √ √ √ √ √ √ 4
Chung-Yu Wu √ √ √ √ √ √ √ √ √ √ √ √ 3
Peng-Heng Chang √ √ √ √ √ √ √ √ √ √ √ 0
Supervisor National Taiwan
University Representative:
Ruey-Shan Guo
√ √ √ √ √ √ √ √ √ √ 0
MediaTek Capital Co.
Representative: Chung-Lang
Liu
√ √ √ √ √ √ √ √ √ √ 3
Paul Wang √ √ √ √ √ √ √ √ √ √ 1
Note: Directors or Supervisors with a "√" sign meets the following criteria:
1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
MediaTek Inc. | 2014 Annual Report 16
3. Not a natural-person shareholder who holds shar te amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. 7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who
the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx 8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. 9. Not been a person of any conditions defined in Article 30 of the Company Law. 10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.
2.4. Remunerations Paid to Directors and Supervisors
2.4.1. Remunerations Paid to Directors (Note 1)
Unit: Share / NT$ thousands
Title/Name
Remunerations Paid to Directors
(A+B+C+D)
as % of 2014
Net Income
Compensations Earned as Employee of MediaTek or of MediaTek Affiliates (A+B+C+D+E
+F+G) as % of
2014 Net
Income
(Note 5)
Oth
er c
om
pe
ns
atio
ns
from
no
n-
su
bs
idia
ry a
ffiliate
s
Salary
(A)
Pension
(B)
Profit
Sharing
(C) (Note 2)
Allowances
(D)
Salary,
Bonus, etc.
(E)
Pension
(F) (Note 3)
Employee Profit Sharing
(G) (Note 4)
Employee
Option
(H)
Granted
Employee
Restricted
Stock (I)
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MediaTek Consolidated
Entities
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Ca
sh
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sh
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ck
Chairman
Ming-Kai Tsai
- - - -
64
,66
9
64
,66
9
30
0
30
0
0.14
0.14
23
5,5
32
23
5,5
32
216
216
- - - - - -
0.6
5
0.6
5
Vice Chairman
Jyh-Jer Cho
Director
Ching-Jiang Hsieh
Director
Cheng-Yaw Sun
Director
Kenneth Kin
Independent
Director
Chung-Yu Wu
Independent
Director
Peng-Heng Chang
MediaTek Inc. | 2014 Annual Report 17
Notes: 1) The policies, standards, combinations, decision procedures and performance linkage of remunerations paid to directors:
authorized the Board of Directors to resolve the compensation based on industry levels. The Articles of Incorporation also provides that MediaTek shall allocate the compensations to its directors and supervisors at 0.5% maximum of the earnings available after deducting the amount of legal reserve. 2) The Board of Directors resolved on April 30, 2015 meeting that NT$64,669 thousand to be allocated as remunerations to Directors. The proposed compensation will be effective upon the approval of shareholders at the Annual Shareholders Meeting.
4) The Board of Directors resolved on April 30, 2015 meeting that NT$579,974 thousand to be allocated as employee profit sharing. The proposed compensation will be effective upon the approval of shareholders at the Annual Shareholders Meeting. The updated information shall be posted on the Company As of the printing date of this annual report, the distribution plan of employee bonus has not been finalized and the above mentioned numbers are estimates. 5) Remunerations of the Company and its consolidated entities paid to directors in 2013, including their employee bonus, totaled NT$229,381 thousand, which was 0.83% of 2013 net profit.
2.4.2. Remunerations Paid to Directors
Compensation Paid to Directors
(A+B+C+D)
Total Compensation Paid to Directors
(A+B+C+D+E+F+G)
MediaTek Consolidated Entities
of MediaTek MediaTek
Consolidated Entities
of MediaTek
Less than NT$2 million - - - -
NT$2 million ~ $5 million - - - -
NT$5 million ~ $10 million Ming-Kai Tsai, Jyh-Jer Cho, Ching-Jiang Hsieh,
Chung-Yu Wu Chung-Yu Wu
NT$10 million ~ $15 million Cheng-Yaw Sun, Kenneth Kin, Peng-Heng Chang Cheng-Yaw Sun, Kenneth Kin,
Peng-Heng Chang
NT$15 million ~ $30 million - - - -
NT$30 million ~ $50 million - - Jyh-Jer Cho
NT$50 million ~ $100 million - - - -
Above NT$100 million - - Ming-Kai Tsai, Ching-Jiang Hsieh
Total 7 7
2.4.3. Remunerations Paid to Supervisors (Note 1)
Unit: NT$ thousands
Title/Name
Remunerations Paid to Supervisors (A+B+C) as % of
2014
Net Income
(Note 3) Other
compensatio
ns from non-
subsidiary
affiliates
Salary
(A)
Profit Sharing
(B) (Note 2)
Business
Expense (C)
Me
dia
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dia
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tities
Supervisor
Paul Wang
- - 20,639 20,639 210 210 0.04 0.04 None
Supervisor
MediaTek Capital Co.
Representative: Chung-Lang Liu
Supervisor
National Taiwan University
Representative: Ruey-Shan Guo
Note: 1. The policies, standards, combinations, decision procedures and performance linkage of remunerations paid to directors: The
authorized the Board of Directors to resolve the compensation based on industry levels. The Articles of Incorporation also provides that MediaTek shall allocate the compensations to its directors and supervisors at 0.5% maximum of the earnings available after deducting the amount of legal reserve. 2. The Board of Directors resolved on April 30, 2015 meeting that NT$20,639 thousand to be allocated as remunerations to Supervisors. The proposed compensation will be effective upon the approval of shareholders at the Annual Shareholders Meeting. The upda 3. Remunerations of the Company and its consolidated entities paid to supervisors totaled NT$14,243 thousand, which was 0.05% of 2013 net profit.
MediaTek Inc. | 2014 Annual Report 18
2.4.4. Remunerations Paid to Supervisors
Compensation Paid to Supervisors
MediaTek Consolidated Entities of
MediaTek
Less than NT$2 million - -
NT$2 million ~ $5 million - -
NT$5 million ~ $10 million Paul Wang, MediaTek Capital Co., Ltd, National Taiwan University
NT$10 million ~ $15 million - -
NT$15 million ~ $30 million - -
NT$30 million ~ $50 million - -
NT$50 million ~ $100 million - -
Above NT$100 million - -
Total 3
MediaTek Inc. | 2014 Annual Report 19
3. Management Team
3.1. Profiles of Key Managers
As of April 30, 2015 / Unit: Shares
Title/Name Nationality Date
Effective
Current
Shareholding
Spouse & Minor
Shareholding
Shareholding by
Nominee
Arrangement Selected Education &
Past Positions
Current Positions at Other
Companies
Shares % Shares % Shares %
Chairman & CEO
Ming-Kai Tsai
R.O.C May 21,
1997
41,006,187 2.61% 46,351,145 2.95% - - - Master, Electrical Engineering, University of
Cincinnati, USA
- President of the 2nd Business Group, UMC
- Chairman, Andes Technology
Corp. and JMicron Technology
Corp. Vice Chairman
Jyh-Jer Cho
R.O.C Sep. 15,
2005
30,325,222 1.93% 10,784,414 0.69% - - - Master, Electronics Engineering, National Chiao
Tung University
- Manager, Multimedia R&D Team, UMC
(None)
President
Ching-Jiang Hsieh
R.O.C Sep. 15,
2005
4,004,921 0.25% 1,469,489 0.09% - - - Master, Electrical Engineering, National Taiwan
University
- Engineer, Multimedia R&D Team, UMC
-
affiliates
Senior Vice President
Chwei-Huang Chang
R.O.C July 1,
2006
803,110 0.05% 673,318 0.04% - - - Master, Electrical Engineering, Polytechnic
University, USA
- Engineer, Multimedia R&D Team, UMC
(None)
Senior Vice President
Kou-Hung Loh
R.O.C July 1,
2006
- - - - - - - Ph.D., Electrical Engineering, Texas A&M
University
- CEO and founder of Silicon Bridge
(None)
Senior Vice President
Cheng-Te Chuang
R.O.C April 7,
2009
1,034,207 0.07% 328,077 0.02% - - - Master, Electronics Engineering, National Chiao
Tung University
- Engineer, UMC
(None)
Senior Vice President
Jeffrey Ju
R.O.C May 1,
2012
22,401 0.00% 28,744 0.00% - - - Master, Electronics Engineering, National Chiao
Tung University
- Engineer, Winbond
-
Senior Vice President
Joe Chen
R.O.C July 1,
2012
177,787 0.01% 30,414 0.00% - - - Master, Electronics Engineering, National Chiao
Tung University
- Engineer, SiS Corp
(None)
Senior Vice President & CTO
Kevin Jou
R.O.C May 30,
2011
- - - - - - - Ph.D, Electrical Engineering, University of
Southern California
- Vice President, Qualcomm Inc.
-
Senior Vice President & CFO
& Spokesperson
David Ku
R.O.C Jan. 1,
2011
37,842 0.00% - - - - - MBA, University of Illinois at Urbana Champaign
- Vice President of JPMorgan Investment bank
-
affiliates and invested
companies Vice President & General
Counsel
WF Hsu
R.O.C May 12,
2010
- - - - - - - Ph.D., Law School, University of Washington
- Lawyer, Johns Day
- Director, Asia Pacific
Intellectual Property
Association
MediaTek Inc. | 2014 Annual Report 20
Title/Name Nationality Date
Effective
Current
Shareholding
Spouse & Minor
Shareholding
Shareholding by
Nominee
Arrangement Selected Education &
Past Positions
Current Positions at Other
Companies
Shares % Shares % Shares %
Vice President & CMO
Johan Erik Lodenius
Sweden Dec. 20,
2012
- - - - - - - Bachelor, Electronics and Computer
Technology, Lund Institute of Technology
- Senior Vice President, Qualcomm Inc.
- CEO, Coresonic AB
-
Vice President
Jen-Chieh Yu (Note1)
R.O.C Feb. 16,
2015
2 0.00% - - - - -Master, Electrical Engineering, National Taiwan
University
-Technical Director, Afreey Inc.
-
Note 1: Mr. Jen-Chieh Yu
3.2. Remunerations and Employee Bonus Paid to Key Managers (Note 1)
Unit: Share / NT$ thousands
Name / Title
Salary (A) Pension (B) (Note 2) Bonus (C) Employee Profit Sharing (D) (A+B+C+D) as % of 2014 Net Income (Note 4) Employee Stock Options Restricted Stock
Remuneration from non-subsidiary affiliates Me
dia
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MediaTek (Note 3) Consolidated Entities
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olid
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olid
ate
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tities
Cash Stock Cash Stock
Chairman & CEO
Ming-Kai Tsai
31,103 50,473 972 3,076 566,741 639,510 - - - - 1.29 1.49 - - - - (None)
Vice Chairman
Jyh-Jer Cho
President
Ching-Jiang Hsieh
Senior Vice President
Chwei-Huang Chang
Senior Vice President
Kou-Hung Loh
Senior Vice President
Cheng-Te Chuang
Senior Vice President
Jeffrey Ju
Senior Vice President
Joe Chen
Senior Vice President & CTO
Kevin Jou
Senior Vice President & CFO &
Spokesperson
David Ku
Vice President & General Counsel
WF Hsu
Vice President & CMO
Johan Erik Lodenius
MediaTek Inc. | 2014 Annual Report 21
Note:
1. The policies, standards, combinations, decision procedures and performance linkage of remunerations paid to managers: The
es
and risks of the Company.
2. The company did not have pension payment in 2014. The provision for pension expense in 2014 at MediaTek and the consolidated
entities were NT$972 thousand and NT$3,076 thousand, respectively.
3. The Board of Directors resolved on April 30, 2015 meeting that NT$579,974 thousand to be allocated as employee bonus. The
proposed compensation will be effective upon the approval of shareholders at the Annual Shareholders Meeting. The updated
informati
employee bonus has not been finalized and the above mentioned numbers are estimates.
4. Remunerations and bonus of MediaTek and its consolidated entities paid to key managers in 2013 were NT$473,515 thousand and
NT$558,849 thousand respectively which were 1.72% and 2.03% of 2013 net income, respectively.
5. Mr. Jen- 5 and his 2014 remuneration is not included.
3.3. Key Managers Remunerations Scale
Remuneration scale for individual key managers
Compensation Paid to Key Managers
MediaTek Consolidated Entities of
MediaTek
Less than NT$2 million - -
NT$2 million ~ $5 million - -
NT$5 million ~ $10 million - -
NT$10 million ~ $15 million - -
NT$15 million ~ $30 million - -
NT$30 million ~ $50 million Jyh-Jer Cho,WF Hsu, Kevin Jou, Johan Erik Lodenius
NT$50 million ~ $100 million Chwei-Huang Chang,Kuo-Hung Loh, Cheng-Te Chuang,
David Ku, Jeffrey Ju, Joe Chen
Above NT$100 million Ming-Kai Tsai, Ching-Jiang Hsieh
Total 12
3.4. Employee Bonus Paid to Key Managers: None
MediaTek Inc. | 2014 Annual Report 22
4. Corporate Governance Report
4.1. Operation of the Board
Meeting Status
General Meeting on June 13, 2012, effective immediately. (From June 13, 2012 to June 12, 2015)
The 6th Board of Directors held 8 sessions in 2014. The attendance of the Directors is shown in the
following table:
Title/Name Attend in Person By Proxy Attendance Rate
in Person (%) Note
Chairman: Ming-Kai Tsai 8 0 100% Re-elected
Vice Chairman: Jyh-Jer Cho 8 0 100% Re-elected
Director: Ching-Jiang Hsieh 8 0 100% Re-elected
Director: Cheng-Yaw Sun 8 0 100% Newly-elected
Director: Kenneth Kin 8 0 100% Newly-elected
Independent Director:
Chung-Yu Wu 7 0 88% Newly-elected
Independent Director:
Peng-Heng Chang 7 1 88% Newly-elected
4.1.2. Other Required Notes for the Board of Directors Meetings:
A. Items listed in Article 14-3 in Securities and Exchange Act or Board resolutions independent
directors have dissenting opinions or qualified opinions with notes in minutes of the directors
meetings: None.
B. Execution status for Article 206 of the Company Act regarding matters bearing on the
personal interests of directors: None.
a. Establishment of the remuneration committee and independent directors: the Company
established the remuneration committee on Aug 24, 2011 and elected 2 seats of
operation. In addition, the
Company will elect 3 seats of independent directors in the 2015 AGM and establish an audit
committee to enhance corporate governance operations.
Internal n December 29, 2011.
4.2.
General Meeting held on June 13, 2012, effective immediately. (From June 13, 2012 to June 12, 2015)
The 6th Board of Directors held 8 sessions in 2014. The attendance of the Supervisors is shown in
the following table:
MediaTek Inc. | 2014 Annual Report 23
Title/Name Attend in Person Attendance Rate
in Person (%) Note
Supervisor
MediaTek Capital Co.
Representative: Chung-Lang Liu
7 88% Re-elected
Supervisor
National Taiwan University
Representative: Ruey-Shan Guo
6 75% Newly-elected
Supervisor
Paul Wang 4 50% Newly-elected
A. Supervisors and responsibilities:
a. Communication between Supervisors and employees, shareholders: The Company
reports to Supervisors on a regular basis. Supe
employees, shareholders, and interested parties are able to contact them freely.
b. Communication between Supervisors and auditors and CPAs
audit managers and the Finance Division report to the Supervisors on issues relating to
regularly and keep communication channels with the CPAs open.
B. If any Supervisor made a statement of opinion during the Board of Directors meeting, the
MediaTek Inc. | 2014 Annual Report 24
4.3. Corporate Governance Implementation as Required by the Taiwan Financial Supervisory Commission
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
1. Does the company establish and disclose the
Corporate Governance Best-Practice Principles
-Practice
The Company has set up independent directors and the remuneration committee and will establish
an audit committee this year. All the directors of The Company are world class professionals coming
from industry and academic circles, and the board has established a comprehensive corporate
governance framework. The Company also established a complete internal control system based on
corporate governance best-practice principles, and fairly treat shareholders while protect their
rights. Although the Company has not yet formally created a document for the corporate
governance principles, the Implementation Status is fully in accordance with the TSE Corporate
Governance Best Practice Principles.
Same as the
summary
description
(1). Does the company establish an internal
suggestions, doubts, disputes and litigations, and
implement based on the procedure?
The Company has designated relevant departments, such as Investor Relations, Public Relations,
Legal, etc. to handle shareholder suggestions or disputes.
None
(2). Does the company possess the list of its major
shareholders as well as the ultimate owners of
those shares?
The Company tracks the shareholdings of directors, supervisors, officers, and shareholders holding
more than 10% of the outstanding MediaTek shares.
None
(3). Does the company establish and execute the
risk management and firewall system within its
conglomerate structure?
When designing the structure of its subsidiaries, the Company has implemented a firewall
mechanism. The Company and its subsidiaries have established appropriate internal control
systems.
None
(4). Does the company establish internal rules
against insiders trading with undisclosed
information?
prohibiting staffs and managers from insider trading with material nonpublic information. Violators
are subject to punishment, investigation, and legal liability.
None
3. Composition and Responsibilities of the Board
of Directors
(1). Does the Board develop and implement a
diversified policy for the composition of its
members?
The board members of the Company have diversified backgrounds, such as engineering and finance,
in accordance with a policy of diversification.
None
(2). Does the company voluntarily establish other
functional committees in addition to the
Remuneration Committee and the Audit
Committee?
A remuneration committee is established under the board, and will establish the audit committee in
None
(3). Does the company establish a standard to
measure the performance of the Board, and
The remuneration committee sets up and reviews the performance evaluation and remuneration
policy, standard, system and framework for board of directors.
None
MediaTek Inc. | 2014 Annual Report 25
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
implement it annually?
(4). Does the company regularly evaluate the
independence of CPAs?
The approval of the Board is required for employment or replacement of independent auditors. The
board will regularly conduct evaluations of auditor independence. In order to strengthen the
starting from this year, after establishment of the audit committee after 2015 AGM, the audit
committee will conduct evaluations of auditor independence to the board of directors every year..
None
4. Does the company establish a communication
channel and build a designated section on its
website for stakeholders, as well as handle all
the issues they care for in terms of corporate
social responsibilities?
The Company will publish a CSR report this year, and also establish a Stakeholder section on the
company website
Same as the
summary
description
5. Does the company appoint a professional
shareholder service agency to deal with
shareholder affairs?
in regards to the general meeting.
None
6. Information Disclosure
(1). Does the company have a corporate website to
disclose both financial standings and the status
of corporate governance?
1. MediaTek discloses financial information and corporate governance items on its company website:
www.mediatek.com
2. MediaTek has designated appropriate persons to handle information collection and disclosure.
Contact person: Sophia Liang, TEL: +886-(0)3-567-0766 ext.26568
3. MediaTek has established a spokesperson policy. Spokesperson: David Ku;
Deputy Spokesperson: Jane Chen.
4. MediaTek provides investor conferences webcasts and presentation materials on its website in a
timely manner
5. MediaTek discloses real-time information to shareholders and stakeholders on both Company
website and MOPS website.
None
(2). Does the company have other information
disclosure channels (e.g. building an English
website, appointing designated people to handle
information collection and disclosure, creating a
spokesman system, webcasting investor
conferences)?
None
7. Is there any other important information to
facilitate a better understanding of the
including but not limited to employee rights,
employee wellness, investor relations, supplier
relations, rights of stake
of risk management policies and risk evaluation
measures, the implementation of customer
relations policies, and purchasing insurance for
1. MediaTek discloses its financial statements and corporate governance information on its Chinese
and English websites (www.mediatek.com).
The Company aims to provide free access to transparent information for employees, investors,
suppliers and stakeholders.
2. Med
provides new regulation updates that require the attention of Directors and Supervisors. The
executive team of the Company also reports to the Board and the Supervisors periodically. Director
and Supervisor training records can be found on the MOPS website.
3. The Company has already instituted internal control systems as required by law and has properly
implemented the system. The Company also conducts risk assessments on banks, customers, and
None
MediaTek Inc. | 2014 Annual Report 26
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
directors and supervisors)? suppliers in order to reduce credit risks.
4. All Directors of the Company avoid issues when there are conflicts of interests.
5. MediaTek maintains D&O insurance for its Directors, Supervisors, and key officers.
8. Has the company implemented a self-
evaluation report 2 on corporate governance or
has it authorized any other professional
organization to conduct such evaluation? If so,
please describe the opinion from the Board, the
result of self or authorized evaluation, the major
deficiencies, suggestions, or improvements.
The Company participated in the self-evaluation of corporate governance accord with the Corporate
Governance Evaluation System of the TSE. In the future, the Company will improve the process of
self-evaluation of corporate governance according to the results. In addition, MediaTek was awarded
Magazine and received an A ranking among listed companies in the 12th Information Disclosure and
Transparency Ranking System held by the Securities & Futures Institute.
None
MediaTek Inc. | 2014 Annual Report 27
4.4. Remuneration Committee
4.4.1.
The remuneration committee aims at establishing and regularly reviewing the performance
evaluation procedure for directors, supervisors and managers as well as establishing
compensation policy, system, standard and structure and regularly reviewing the compensation
of directors, supervisors and managers.
4.4.2.
on August 24, 2011 and has three
members. According to related regulations of the Securities and Futures Bureau, Financial
Supervisory Commission, the professional qualification and independence criteria of the
Criteria
Title / Name
Meet the Following Professional Qualification Requirements,
Together with at Least Five Years Work Experience Criteria (Note)
Number of other
public
companies
concurrently
serving as an
independent
director
An instructor or
higher position in a
department of
commerce, law,
finance, accounting,
or other academic
department related
to the business needs
of the company in a
public or private
junior college,
college or university
A judge, public
prosecutor, attorney,
certified public
accountant, or other
professional or
technical specialists
who has passed a
national examination
and been awarded a
certificate in a
profession necessary
for the business of
the company
Have work
experience in the
area of
commerce, law,
finance, or
accounting, or
otherwise
necessary for the
business of the
company
1 2 3 4 5 6 7 8
Independent
Director
Chung-Yu Wu
3
Other
Wen-Tsuen Chen 1
Independent
Director
Peng-Heng Chang
0
Note: Directors or Supervisors with a "" sign meet the following criteria:
1. Not an employee of the Company or any of its affiliates.
2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent
director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of
the voting shares.
3. Not a natural-
e amount of 1% or more of the total number of outstanding shares of the Company or
ranking in the top 10 in holdings.
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons
in the preceding three subparagraphs.
5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of
outstanding shares of the Company or who holds shares ranking in the top five holdings.
6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has
a financial or business relationship with the Company.
7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company,
or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the
Company, or a spouse thereof.
8. Not been a person of any conditions defined in Article 30 of the Company Law.
MediaTek Inc. | 2014 Annual Report 28
4.4.3. Remuneration Committee Meeting Status
The convener, Mr. Chung-Yu Wu held two sessions in 2014 and the attendance of members is
shown in the following table:
Title Name Attend in
Person
Attendance Rate
in Person (%)
Note
Convener Chung-Yu Wu 2 100%
None Member Wen-Tsuen Chen 2 100%
Member Peng-Heng Chang 2 100%
4.4.4. Other Required Notes for Remuneration Committee:
B. In cases remuneration committee members have dissenting opinions or qualified opinions
against the resolution and recorded with notes in paper, the Company shall list date/number of
the remuneration committee meeting and agenda: None.
MediaTek Inc. | 2014 Annual Report 29
4.5. Status of Fulfilling Corporate Social Responsibility
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
1. Implementation of corporate governance
(1). Does the company declare its corporate social
responsibility policy and examine the results of
the implementation?
of corporate governance, environmental sustainability,
social responsibility and information disclosure has been in accordance with corporate social
responsibility policy principles. In addition, the Company set up internal performance targets and
regula
details.
Same as the
summary
description
(2). Does the company provide educational
training on corporate social responsibility on a
regular basis?
The Company arranges external and internal corporate social responsibility trainings for working
team and core personnel in charge of corporate social responsibility implementation. Frequency of
dard updates.
None
(3). Does the company establish exclusively (or
concurrently) dedicated first-line managers
authorized by the board to be in charge of
proposing the corporate social responsibility
policies and reporting to the board?
The Company established a Corporate Sustainability Development Team in 2014, led by Chairman Mr.
Ming-Kai Tsai. Following sustainable development as the highest guiding principle, the Company
focuses on three aspects, economics, society, and environment, to instruct the relevant
departments responsible for the implementation of each project. The human resources department
and manufacturing & process technology department are the core team for coordinating all
matters, including setting up the annual sustainable development objective, communication
between management and each department, allocation of internal resources, controlling project
progress, audit certification, awards application, and other tasks. The Company holds regular
discussion meetings each year to report the execution plans of the current year focusing on
economic, social and environmental aspects, while review the implementation results of the
previous year. Therefore, the Company can improve continually in order to achieve the highest
principle of sustainable development.
None
(4). Does the company declare a reasonable
salary remuneration policy, and integrate the
employee performance appraisal system with its
corporate social responsibility policy, as well as
establish an effective reward and disciplinary
system?
The Company reviews the remuneration standard in accordance to market rates and stipulate a
reasonable remuneration policy according to macroeconomic indices to ensure a competitive level
of remuneration. Also, by offering a platform of two-way communication though regular
performance evaluations and future plan developments, we achieve individual and organization
development by rewarding based on performance and encourage employees to grow with the
company.
None
2. Sustainable Environment Development
(1). Does the company endeavor to utilize all
resources more efficiently and use renewable
materials which have low impact on the
environment?
The process to optimize utilization of raw materials:
Waste management and recycling: in order to manage waste efficiently and maximize the benefits
of recycling, the Company prioritizes waste reduction, classification for reuse, adherence to recycling
and reutilization. The Company also handles and disposes waste properly and continually improves
waste storage, transport and processes and evaluate the impact on the environment. We choose
only qualified partners for waste disposal and recycling, and also audit the waste processes
None
MediaTek Inc. | 2014 Annual Report 30
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
randomly to ensure the legal disposal of our waste and fulfill our responsibility in waste
management supervision.
(2). Does the company establish proper
environmental management systems based on
the characteristics of their industries?
Sustain our efforts to maintain the Environmental Management System (ISO-14001) and
Occupational Health and Safety Management System (OHSAS-18001).
Dedicated personnel are assigned to take responsibility for environmental management and
promotion of environmental principles.
None
(3). Does the company monitor the impact of
climate change on its operations and conduct
greenhouse gas inspections, as well as establish
company strategies for energy conservation and
carbon reduction?
The Company implements the greenhouse gas examination and makes continuous efforts to reduce
CO2 creation and save energy including the reducing, reusing and recycling resources.
Dedicated personnel are assigned to take responsibility for environmental management.
None
3. Preserving Public Welfare
(1). Does the company formulate appropriate
management policies and procedures according
to relevant regulations and the International Bill
of Human Rights?
The Company abides by the rules, policies, and procedures of the Labor Standards Act and
international human rights agreements to protect the legitimate rights and interests of employees.
None
(2). Has the company set up an employee hotline
or grievance mechanism to handle complaints
with appropriate solutions?
The Company establishes complaint mechanism and channels for employees, we also assign
dedicated personnel and established an employee suggestion mailbox and dedicated personnel are
t of Sexual
specific institutional sexual harassment grievance committee to handle gender equality in the
workforce. In order to react rapidly, employee suggestions can directly go to the HR head and
general manager.
None
(3). Does the company provide a healthy and safe
working environment and organize training on
health and safety for its employees on a regular
basis?
The Company aims to offer a safe and healthy working environment and promote a health life. The
Company also regularly hold safety and health training sessions to employees.
None
(4). Does the company setup a communication
channel with employees on a regular basis, as
well as reasonably inform employees of any
significant changes in operations that may have
an impact on them?
The Employee Welfare Committee was established to encourage employees to enjoy company
benefits. Labor Management conferences are convened periodically to ensure labor harmony. If
significant impacts to operating activities are expected, it will be announced early to employees.
None
(5). Does the company provide its employees with
career development and training sessions?
The Company offers a comprehensive career development training program, a challenging learning
capabilities.
None
MediaTek Inc. | 2014 Annual Report 31
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
(6). Does the company establish any consumer
protection mechanisms and appealing
procedures regarding research development,
purchasing, producing, operating and service?
The Company established standards of the employee ethical behaviors and a reporting system.
For further information, please refer to http://www.mediatek.com/zh-
TW/about/company-overview/code-of-ethics/ethical-misconduct-reporting/
None
(7). Does the company advertise and label its
goods and services according to relevant
regulations and international standards?
Products of the Company comply with requirements of relevant regulations and international
standards.
None
(8). Does the company evaluate the records of
before taking on business partnerships?
Past record of any harming behavior on environment and the society is one of the key items in
None
(9). Do the contracts between the company and
its major suppliers include termination clauses
which come into force once the suppliers breach
the corporate social responsibility policy and
cause appreciable impact on the environment
and society?
If a supplier acts against the standards of the Company, rights to terminate cooperation will be
carried out.
None
4. Enhancing Information Disclosure
(1). Does the company disclose relevant and
reliable information regarding its corporate social
responsibility on its website and the Market
Observation Post System (MOPS)?
The Company discloses CSR information on its co
Company will publish CSR report from 2015 according to the GRI standard on an annual basis.
None
Responsibility Best-Practice Principles for TWSE/TPEx Listed
The Company has not yet expressly set up CSR regulations in written, but the implementation status is
6. Other important information to facilitate better understanding of the company s corporate social responsibility practices:
Please refer to the -contribution/
7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certificati on institutions:
The CSR report is expected to be published in the third quarter of 2015, and adopt ISAE 3000 for examination purposes.
MediaTek Inc. | 2014 Annual Report 32
4.6. Ethical Corporate Management
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
1. Establishment of ethical corporate
management policies and programs
(1). Does the company declare its ethical
corporate management policies and procedures
in its guidelines and external documents, as well
as the commitment from its board to implement
the policies?
The company strictly follows the six core values: integrity, conviction inspired by deep thinking,
customer focus, constant renewal, innovation and inclusiveness as the guidance of business
operation and sets up various internal guidelines based on the core values.
None
(2). Does the company establish policies to
prevent unethical conduct with clear statements
regarding relevant procedures, guidelines of
conduct, punishment for violation, rules of
appeal, and the commitment to implement the
policies?
The company has the following corporate governance guidelines and
regulations in place:
(3) Rules for Election of Directors and Supervisors
(4) Procedures Governing the Acquisition or Disposition of Assets
(5) Operating Procedures of Endorsement and Guarantee
(6) Operating Procedures of Outward Loans to Others
(7) Procedures of Internal Material Information
(8) Remuneration Committee Charter
None
(3). Does the company establish appropriate
precautions against high-potential unethical
conducts or listed activities stated in Article 2,
Paragraph 7 of the Ethical Corporate
Management Best-Practice Principles for
TWSE/TPEx Listed Companies?
Integrity is highly-
Board of Directors and key management. The Board of Directors and key management will not vote
in cases where they have a conflict of interest.
None
2. Fulfill operations integrity policy
ethical records and include ethics-related
clauses in business contracts?
principle. The Company follows the Company Act, the Securities and Exchange Act, Business Entity
Accounting Act, Political Donations Act, Law Against Accepting Bribes Act, Government Procurement
Act, Act on Recusal of Public Servants Due to Conflicts of Interest and other relevant regulations for
listed companies. The Company also conducts due diligence before trading with upstream and
downstream companies to minimize the risks.
None
MediaTek Inc. | 2014 Annual Report 33
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
(2). Does the company establish an exclusively (or
concurrently) dedicated unit supervised by the
Board to be in charge of corporate integrity?
The Company believes integrity is at the core of its value in terms of business operations. The board
of directors establishes various organizations and channels, such as the remuneration committee,
audit committee (2015), internal audit, and reporting system of violating ethical behaviors which is
responsible directly by managers, to fulfill the duties of integrity operations. The internal auditing
department plays an important role in keeping compliant with the ethical corporate management
practices and regulations. The internal auditing department audits various items according to the
auditing plan though the approval of the board of directors, and reports to the board of directors for
the auditing result and the improvement project. Each organization is under the supervision of the
board of directors to carry out the integrity corporate management.
None
(3). Does the company establish policies to
prevent conflicts of interest and provide
appropriate communication channels, and
implement it?
Behavior of the Company clearly define the policy to prevent conflicts of interest. In addition, the
Company also designates a contact for each department to consult, communicate or resolve
relevant issues in order to achieve results rapidly and effectively.
None
(4). Has the company established effective
systems for both accounting and internal control
to facilitate ethical corporate management, and
are they audited by either internal auditors or
CPAs on a regular basis?
The company has built up an effective accounting system and internal control systems that is
constantly under review and evaluation to ensure the system's design and execution remains
effective. Internal auditors audit the system referred in the prior paragraph.
None
(5). Does the company regularly hold internal and
external educational trainings on operational
integrity?
Integrity and respect are the core values which the Company is committed to and advocates
regularly.
None
3. Operation of the integrity channel
(1). Does the company establish both a
reward/punishment system and an integrity
hotline? Can the accused be reached by an
appropriate person for follow-up?
The Company established the Reporting Procedure and the reporting unethical behavior system.
Employees can use this system to report unethical and improper behaviors, and the Company will
designate senior management to handle the case.
None
(2). Does the company establish standard
operating procedures for confidential reporting
on investigating accusation cases?
The Company established the SOP and relevant confidentiality mechanisms. None
(3). Does the company provide proper
whistleblower protection?
The Company established precautions in order to protect whistleblowers.
4. Does the company disclose its ethical
corporate management policies and the results
and MOPS?
The Company discloses and advocates Ethical Corporate Management Best Practice Principles on
ant
None
MediaTek Inc. | 2014 Annual Report 34
Item Implementation Status Reason for Non-
implementation Yes No Summary Description
5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best -Practice Principles for TWSE/TPEx Listed Companies,
please describe any discrepancy between the policies and their implementation.
The Company established the standard of the ethical corporate management and the behavior of directors and managers. Implemen tation Status of ethical corporate management of
-
the corporate governance section for more details
6. , review and amend its policies).
Please refer to the corporate governance section for more details.
MediaTek Inc. | 2014 Annual Report 35
4.7. Corporate Governance Guidelines and Regulations
4.7.1 The company has the following corporate governance guidelines and regulations in place:
(2)
(3) Rules for Election of Directors and Supervisors
(4) Procedures Governing the Acquisition or Disposition of Assets
(5) Operating Procedures of Endorsement and Guarantee
(6) Operating Procedures of Outward Loans to Others
(7) Procedures of Internal Material Information
(8) Remuneration Committee Charter
4.7.2. More detailed information on corporate governance guidelines and regulations:
4.8. Other Important Corporate Governance Information The Company continues to add more resources to enhance corporate governance including adding
corporate governance session and attaching corporate governance guidelines and regulations for
download on the company website, disclosing material information in a timely matter and host
regular investor conferences.
4.8.1 Directors and Supervisors Profession Enhancement Status
Title/Name Date Host by Training / Speech title Hours
Independent Director
Chung-Yu Wu
Dec 19, 2014 Taiwan Corporate
Governance Association Merge and Acquirement Practice Workshop 3
May 9, 2014 Securities & Future
Institute
Directors and Supervisors Practice Advanced
Seminar: Protection of operating secrets 3
Director
Kenneth Kin
Dec 2, 2014 Taiwan Corporate
Governance Association
A view on corporate board efficiency: in regard to
Institute of Directors
3
Oct 24, 2014 Securities & Future
Institute
The practical tasks of Compensation Committees
in Taiwan 3
May 14, 2014 Taiwan Corporate
Governance Association
Solid corporate governance execution and
corporate sustainability 3
4.8.2. Key Management Profession Enhancement Status
Title/Name Date Host by Training / Speech title Hours
Senior Vice President
& CFO
&Spokesperson
David Ku
Oct 27, 2014
Oct 28, 2014
Accounting Research and
Development Foundation Advanced Lectures for Accounting Mangers 12
Director, Internal
Audit
Kirin Liu
Dec 11, 2014
Dec 12, 2014
Computer Audit
Association
Six episodes in investigation of fraud in
computer audition 15
.
MediaTek Inc. | 2014 Annual Report 36
4.9. Status of the Internal Control System Implementation
4.9.1. Declaration of Internal Control
MediaTek Inc.
Statement of Declaration of Internal Control
Date: March 19th, 2015
MediaTek Inc. has conducted internal audits in accordance with its Internal Control Regulations for the period ended
December 31st, 2014, and hereby declares the following:
1. The Company acknowledges and understands that the establishment, enforcement, and preservation of internal control
systems are the responsibility of the Board and that the managers and the Company have already established such
systems. The purpose is to reasonably ensure the effectiveness (including profitability, performance, and security of
assets), the reliability, timeliness, transparency of financial reporting, and legal and regulation compliance.
2. Internal control systems have limitations, no matter how perfectly they are designed. As such, effective internal control
systems may only reasonably ensure the achievement of the aforementioned goals. Further, the operation environment
and situation may vary, and hence the effectiveness of the internal controls systems. The internal control systems of the
Company feature certain self-monitoring mechanisms. The company will take immediate corrective actions once any
shortcomings are identified.
3. The Company judges the effectiveness of the internal control systems in design and enforcement according to the
design and enforcement of internal control systems.
There are five components for effective internal control as specified by the Criteria with which the procedures for
effective internal controls are composed: (1) Control environment, (2) Risk evaluation, (3) Control operation, (4) Information
and communication, and (5) Monitoring. Each of the elements in turn contains certain audit items, and the Criteria shall be
referred to for details.
4. The Company has adopted the aforementioned internal control systems for an internal assessment of the effectiveness
of internal control design and enforcement.
5. Based on the aforementioned audit findings, the Company holds that within the aforementioned period, its internal
control procedures (including the procedures to monitor subsidiaries), effectiveness and efficiency of operations,
reliability, timeliness, transparency of reporting, and compliance with relevant legal regulations, and design and
enforcement of internal controls, are effective. The aforementioned goals can be achieved with reasonable assurance.
6. This statement of declaration shall form an integral part of the annual report and prospectus of the Company and shall be
made public. If there is any fraud, concealment, or unlawful practices discovered in the content of the aforementioned
information, the Company shall be liable to legal consequences under Article 20, 32, 171, and 174 of the Securities and
Exchanges Act.
7. This statement of declaration has been approved by the Board on March 19th 2015 with all Directors in session under
unanimous consent.
MediaTek Inc.
Ming-Kai Tsai
Chairman
Ching-Jiang Hsieh
President
MediaTek Inc. | 2014 Annual Report 37
4.9.2. Disclose the Review Report of Independent Auditors if They are Retained for Reviewing the Internal Control System
None
4.10. Reprimands on the Company and its Staff Reprimand on the Company and its Staff in Violation of Laws, or Reprimand on its Employees in
Violation of Internal Control System and Other Internal Regulations, Major Shortcomings and
Status of Correction: None.
Meeting date Meeting Major Resolutions Implementation Status
June 12,
2014
2014 Annual
General
Meeting
Acknowledgement Items:
(1) Adoption of the 2013 Business Report and Financial
Statements
(2) Adoption of the Proposal for Distribution of 2013
Profits
Discussion Items:
Procedures Governing the Acquisition or Disposition of Assets
All of the resolutions of the
been fully implemented in
accordance with the
resolutions.
MediaTek Inc. | 2014 Annual Report 38
4.11.2. Major Resolutions of Board Meetings
During the 2014 calendar year and as of the printing date of this annual report, 11 Board Meetings
were convened. Major resolutions approved at these meetings are summarized below:
Date Meeting Major Approvals
Jan 27, 2014
The 14th meeting of the 6th board
2014 first quarter financial forecasts execution of the MStar Semiconductor merger according to the terms agreed with China's Ministry of Commerce.
Feb 17, 2014
The 15th meeting of the 6
th board
acquisiton of wholly-owned subsidiary Ralink updates for 2014 first quarter financial forecasts
Mar 21, 2014
The 16th meeting of the 6th board
2013 operation report 2013 internal control statement 2014 operating budget plan 2014 AGM date, venue and agenda MStar merger report
Apr 30,
2014
The 17th meeting of
the 6th board
2014 first quarter financial statements 2014 second quarter financial forecasts amendment to "Procedures Governing the Acquisition or Disposition of Assets" amendment to "Operating Procedures of Outward Loans to Others"
Endorsements and guarantee for subsidiaries. Ralink acquisition report 2013 profit distribution
Jun 12,
2014
The 18th meeting of
the 6th board
record date of 2013 profit distribution
assets acquisition contracts relieving from the business strife limitation clause of labor contract
Jul 31, 2014
The 19th meeting of the 6th board
2014 second quarter financial statements
Nov 6, 2014
The 20th meeting of the 6th board
2014 third quarter financial statements
2015 audit plan amendments to internal control system
Feb 09, 2015
The 22th meeting of the 6th board
proposal of Gaintech investment proposal of -construction
proposal of contract signing with Bereau of High Speed Rail, MOTC of ROC. through subsidiary
suspend the non-competition restriction on management vice president appointment
muneration for 2015
Mar 19, 2015
The 23th meeting of the 6th board
2014 operation report 2015 operating budget plan 2014 internal control statement 2015 AGM date, venue and agenda proposal of election of 7th Directors, including independent Directors proposal of 7th
proposal of lift regulations of business strife limitation clause of labor contract amendments to article of association amendment to internal regulations amendment to rules for director and supervision elections amendments to rules of board of directors meetings amendment to procedures for internal material information amendment to remuneration committee charter
establishment of audit committee charter amendment to internal control systems establishment of the code of ethics for director and management
April 30,
2015
The 24th meeting of
the 6th board
2015 first quarter financial statements review and confirm the list of candidates for directors
proposal of 2014 profit distribution 2014 remuneration for directors and supervisors
4.12. Major Issues of Record or Written Statements Made by Any Director Dissenting to Important Resolutions Passed by the Board of Directors
None
4.13. Resignation of Personnel Related to Financial Statement Preparation in 2014 to the Printing Date of this Report
None
MediaTek Inc. | 2014 Annual Report 39
5.
5.1. Auditor Information Ernst & Young, Mr. Shao-Pin Kuo and Mr. Chih-Lai Wang for the period of 2014.
5.2. Information on Audit Fees
Audit Fee Non-Audit
Fee Total
Less than NT$2 million
NT$2 million ~ $4 million
NT$4 million ~ $6 million
NT$6 million ~ $8 million
NT$8 million ~ $10 million
Above NT$10 million
Other important disclosures:
(1) Audit fee and non-audit fee:
Ernst & Young, Mr. Shao-Pin Kuo and Mr. Chih-Lai Wang for the period of 2014 Audit fee paid: NT$10,409 thousand
Total non-audit fee paid: NT$437 thousand
(2) Non-audit fee paid to auditors, the audit firm and its affiliates accounted for more than one-fourth of total audit
fee: No.
(3) Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of previous year:
Not applicable.
(4) Audit fee reduced more than 15% year over year: No.
5.3. Replacement of Independent Auditors in the Last Two Years and Thereafter:
replace the certified public accountants on March 21, 2014 and February 9, 2015.
or managers in charge of
employment in 2014: No.
MediaTek Inc. | 2014 Annual Report 40
6. Net Changes in Shareholding
Net Change in Shareholding and Net Change in Shares Pledged by Directors, Supervisors, Management
and Shareholders with 10% Shareholding or More
Unit: Shares
Title/Name
2014 Jan. 1 to April 30, 2015
Net Change in
Shareholding
Net Change in Shares
Pledged
Net Change in
Shareholding
Net Change in Shares
Pledged
Chairman & CEO
Ming-Kai Tsai - - - -
Director &Vice Chairman
Jyh-Jer Cho - - - -
Director & President
Ching-Jiang Hsieh - - - -
Director
Cheng-Yaw Sun - - - -
Director
Kenneth Kin - - - -
Independent Director
Chung-Yu Wu - - - -
Independent Director
Peng-Heng Chang - - - -
Supervisor
MediaTek Capital Co. - - - -
Supervisor
National Taiwan University - - - -
Supervisor
Paul Wang - - - -
Senior Vice President
Chwei-Huang Chang - - - -
Senior Vice President
Kou-Hung Loh - - - -
Senior Vice President
Cheng-Te Chuang (80,000) - - -
Senior Vice President
Joe Chen - - - -
Senior Vice President
Jeffrey Ju (75,000) - - -
Senior Vice President & CTO
Kevin Jou - - - -
Senior Vice President & CFO &
Spokesperson
David Ku
- - - -
Vice President & CMO
Johan Erik Lodenius - - - -
Vice President & General Counsel
WF Hsu - - - -
Vice President
Jen-Chieh Yu (Note1) - - - -
Note 1: share information disclosure of Mr. Jen-Chieh Yu is from February 16, 2015 when he was appointed as Vice President
Stock Trade with Related Party: None.
Stock Pledge with Related Party: None.
MediaTek Inc. | 2014 Annual Report 41
7. Top 10 Shareholders Who are Related Parties to Each
Other
As of April 14, 2015. Unit: Share/%
Top 10 Shareholders Shareholding
Shareholding under
Spouse and Minor
Shareholding under
3rd Party
Top 10 Shareholders Who
are Related Parties to
Each Other
Shares Proportion Shares Proportion Shares Proportion Name Relationship
Chui-Hsing Lee 46,369,145 2.95 41,006,187 2.61 - - Ming-Kai
Tsai Spouse
JPMorgan Chase Bank N.A.
Taipei Branch in custody for
Oppenheimer Developing
Markets Funds managed by
OppenheimerFunds, Inc.
44,001,000 2.80 - - - - - -
JPMorgan Chase Bank N.A.
Taipei Branch in custody for
Saudi Arabian Monetary Agency
42,976,608 2.73 - - - - - -
Ming-Kai Tsai 41,006,187 2.61 46,369,145 2.95 - -
Chui-
Hsing
Lee
Spouse
Government of Singapore 40,296,954 2.56 - - - - - -
Jyh-Jer Cho 30,325,222 1.93 10,784,414 0.69 - - - -
Vanguard Emerging Markets
Stock Index Fund 26,197,192 1.67 - - - - - -
JPMorgan Chase Bank in
custody for Capital World
Growth and Income Fund
22,520,000 1.43 - - - - - -
Tin-Ren Liu 20,531,763 1.31 3,339,879 0.21 - - - -
JPMorgan Chase Bank N.A.
Taipei Branch in custody for
EuroPacific Growth Fund
17,130,000 1.09 - - - - - -
8. Long-Term Investment Ownership
As of December 31, 2014. Unit: Share/%
Long-Term
Investments
Investments by MediaTek
(1)
Investments Directly or Indirectly
Controlled by Directors, Supervisors,
and Managers of MediaTek (2)
Total Investment
(1) + (2)
Shares Portion Shares Portion Shares Portion
Hsu-Ta Investment
Corp. 1,062,535,590 100% - - 1,062,535,590 100%
MediaTek Investment
Singapore Pte. Ltd. 2,193,635,278 100% - - 2,193,635,278 100%
MediaTek Singapore
Pte. Ltd. 111,993,960 100% - - 111,993,960 100%
T-Rich Technology
(Cayman) Corp. 1,248,583 100% - - 1,248,583 100%
Mstar Semiconductor
Inc. 145,243,592 100% - - 145,243,592 100%
MediaTek Inc. | 2014 Annual Report 42
IV. Capital and Shares
1. Capital and Shares
1.1. Capitalization
As of April 30, 2015, Unit: share/NT$
Month/
Year
Issue
Price
(per
share)
Authorized Capital Paid-in Capital Remarks
Shares Amount Shares Amount
Sources of
Capital
(shares)
Capital
Increase by
Assets Other
than Cash
Date of Approval &
Approval Document
No.
Mar
2014
10 2,000,000,000 20,000,000,000 1,570,590,578 15,705,905,780 Share
Exchange:
221,123,877
52% of MStar
Semiconductor
Mar 31, 2014
Yuan-Shang-Tze
No.1030009455
Apr
2014
10 2,000,000,000 20,000,000,000 1,570,837,871 15,708,378,710 Employee
option
exercised:
247,293
- Apr 30, 2014
Yuan-Shang-Tze
No.1030012285
Jun
2014
10 2,000,000,000 20,000,000,000 1,570,988,882 15,709,888,820 Employee
option
exercised:
151,011
- Jun 16, 2014
Yuan-Shang-Tze
No.1030017211
Aug
2014
10 2,000,000,000 20,000,000,000 1,571,021,521 15,710,215,210 Employee
option
exercised:
32,639
- Aug 15, 2014
Yuan-Shang-Tze
No.1030024069
Nov
2014
10 2,000,000,000 20,000,000,000 1,571,445,544 15,714,455,440 Employee
option
exercised:
424,023
- Nov 25, 2014
Yuan-Shang-Tze
No.1030035311
Apr
2015
10 2,000,000,000 20,000,000,000 1,571,492,244 15,714,922,440 Employee
option
exercised:
46,700
- Apr 2, 2015
Yuan-Shang-Tze
No.1040008927
Apr
2015
10 2,000,000,000 20,000,000,000 1,571,577,147 15,715,771,470 Employee
option
exercised:
84,903
- Registration in process
As of April 30, 2015, Unit: share
Type of Stock Authorized Capital
Remark Outstanding Un-Issued Total
Common Stock 1,571,577,147 428,422,853 2,000,000,000 Listed on TSE
Shelf Registration: None.
MediaTek Inc. | 2014 Annual Report 43
1.2. Composition of Shareholders
As of April 14, 2015; Unit: share / %
Type of
Shareholders
Government
Agencies
Financial
Institutions
Other Juridical
Persons
Foreign Institutions &
Persons Individuals Total
Number of
Shareholders
1 106 582 1,863 75,208 77,760
Shareholding
(shares)
2 77,341,809 109,682,886 981,836,208 402,716,242 1,571,577,147
Holding Percentage
(%)
0.00% 4.92% 6.98% 62.48% 25.62% 100.00%
1.3. Distribution of Shareholding
1.3.1 Distribution of Common Stock
As of April 14, 2015
Common Share
Shareholder Ownership
(Unit: Share)
Number of
Shareholders
Ownership
(Share)
Ownership
(%)
1 ~ 999 31,627 4,343,867 0.28%
1,000 ~ 5,000 36,939 67,645,272 4.30%
5,001 ~ 10,000 4,039 29,444,446 1.87%
10,001 ~ 15,000 1,306 16,106,573 1.02%
15,001 ~ 20,000 764 13,578,633 0.86%
20,001 ~ 30,000 752 18,574,875 1.18%
30,001 ~ 40,000 389 13,615,501 0.87%
40,001 ~ 50,000 242 10,972,138 0.70%
50,001 ~ 100,000 604 43,053,824 2.74%
100,001 ~ 200,000 372 52,888,635 3.37%
200,001 ~ 400,000 260 73,693,919 4.69%
400,001 ~ 600,000 146 71,681,924 4.56%
600,001 ~ 800,000 53 36,745,283 2.34%
800,001 ~ 1,000,000 44 38,814,012 2.47%
Over 1,000,001 223 1,080,418,245 68.75%
Total 77,760 1,571,577,147 100.00%
1.3.2 Distribution of Preferred Stock: Not Applicable
MediaTek Inc. | 2014 Annual Report 44
1.4. Major Shareholders
As of April 14, 2015
Top 10 Shareholders
Total
Shares
Owned
Ownership (%)
Chui-Hsing Lee 46,369,145 2.95%
JPMorgan Chase Bank N.A. Taipei Branch in
custody for Oppenheimer Developing Markets
Funds managed by OppenheimerFunds, Inc.
44,001,000 2.80%
JPMorgan Chase Bank N.A. Taipei Branch in
custody for Saudi Arabian Monetary Agency
42,976,608 2.73%
Ming-Kai Tsai 41,006,187 2.61%
Government of Singapore 40,296,954 2.56%
Jyh-Jer Cho 30,325,222 1.93%
Vanguard Emerging Markets Stock Index Fund 26,197,192 1.67%
JPMorgan Chase Bank in custody for Capital
World Growth and Income Fund
22,520,000 1.43%
Tin-Ren Liu 20,531,763 1.31%
JPMorgan Chase Bank N.A. Taipei Branch in
custody for EuroPacific Growth Fund
17,130,000 1.09%
1.5. Market Price, Net Worth, Earnings, Dividends per Common Share
Unit: NT$ / Share
Item 2013
(Distributed in 2014)
2014
(Distributed in 2015)
Jan. 1 ~ Mar. 31,
2015
Market Price
Per Share
(Note 1)
Highest 448.5 545.0 505.0
Lowest 295.0 384.0 415.5
Average 351.0 467.4 464.9
Book Value
Per Share
Before Distribution 145.55 158.07 **
After Distribution 127.99 * *
Earnings
Per Share
Weighted Average Shares 1,341,660,900 1,544,565,142 1,563,746,061
EPS Not-Adjusted 20.51 30.04 **
Adjusted 20.51 * **
Dividends
Per Share
Cash Dividends 15.00 * **
Stock
Dividend
Earning Distribution - * **
Capital Distribution - * **
Accumulated Undistributed Dividend - - **
Return on
Investment
Price/Earnings Ratio (Note 2) 17.11 15.56 **
Price/Dividend Ratio (Note 3) 23.40 * **
Cash Dividend Yield (Note 4) 4.27% * **
** : Not applicable.
Note 1: Retroactively adjusted for stock dividends and stock bonuses to employees
Note 2: Price/Earnings Ratio = Average Market Price / Earnings Per Share
Note 3: Price/Dividend Ratio = Average Market Price / Cash Dividends Per Share
Note 4: Cash Dividend Yield = Cash Dividends Per Share / Annual Average Market Price
MediaTek Inc. | 2014 Annual Report 45
1.6. Dividend Policy and Status
1.6.1. Dividend Policy under the Article of Incorporation
, needs
for capital, domestic and overseas competition, capital budgeting plans, etc., to come out with a
-term
financial plans. Each year, the Board of Directors shall prepare a profit distribution proposal and
factors, the Company may distribute all distributable profits for the year; dividends to
shareholders may be distributed in cash or in stock, and the cash dividends shall not be lower than
10% of total dividends to shareholders.
The Board adopted a proposal for 2014 profit distribution as follows:
Cash Dividends to Common Shareholders from retained earnings: NT$34,574,697 thousand.
will then determine a cash dividend record date.
1.7. Effect of 2014 Share Dividends to Operating Performance and EPS Not applicable.
1.8. Employee Profit Sharing and Directors and Supervisors Compensation
1.8.1. Employee Profit Sharing and Directors and Supervisors Compensation as Stated in the Article of
Incorporation
When allocating the net profits for each fiscal year, the following order shall be followed: (1).
Reserve for tax payments; (2). Offset losses in previous years, if any; (3). Legal reserve, which is 10%
of the unallocated profits; (4). Allocation or reverse of special reserves as required by law or
government authorities. The remuneration to Directors and Supervisors, will be limited to a
maximum of 0.5% of remaining net profits after deducting item (1) to (4), and shall be paid in cash.
The remaining net profits, after considering retained earnings from previous years and the amount
nd
profit share shall not be lower than 1% of the sum of employee profit share and shareholder
dividends. Employee profit share may be paid in cash or in stock. If the employee profit share is
paid in stock, the Board of Directors shall be authorized to set the criteria for qualified employees,
which may include employees of the Company and its affiliated companies.
1.8.2. Proposed 2014 Employee Profit Sharing and Remuneration to Directors and Supervisors
The Board adopted a proposal on April 30, 2015 for employee cash bonus of NT$579,974 thousand
and remuneration to Directors and Supervisors of NT$85,308 thousand. In accordance with
accounting regulations requir
expensing employee profit shares and remuneration to Directors and Supervisors.
Actual remuneration to Directors and Supervisors was reported at NT$85,308 thousand, versus
the original estimate of NT$84,192 thousand, a difference of NT$1,116 thousand. The difference is
MediaTek Inc. | 2014 Annual Report 46
distributable earnings, while the actual compensation is based on 0.2% of the distributable
earnings. The difference will be accounted for as a change in accounting estimates, and included
meeting.
1.8.3. Earnings Retained in Previous Period (2013) Allocated as Employee Profit Sharing and Directors and
Supervisors Compensation
Unit: share / NT$1,000
AGM
resolution Estimate Difference Shares
Share price
(NT$)
Reason of
difference
Employee Cash Bonus 1,593,476 1,593,476 - - - -
Remuneration to Directors &
Supervisors
57,880 56,784 1,096 - - (Note)
Note: The difference was mainly because different calculation basis
nancial report,
1.9. Repurchase of Company Shares: None
2. Status of Corporate Bonds
None
3. Status of Preferred Stocks
None
4. Status of GDR/ADR
None
MediaTek Inc. | 2014 Annual Report 47
5. Status of Employee Stock Option Plan
5.1. Issuance of Employee Stock Options
As of April 30, 2015 / Unit: share and NT$ thousands
Employee Stock Options Granted 1st Grant 2nd Grant 3rd Grant 4th Grant
Approval Date by the Securities & Futures
Bureau
Dec. 19, 2007 Dec. 19, 2007 Jul. 27, 2009 May 10, 2010
Issue (Grant) Date Mar. 31, 2008 Aug. 28, 2008 Aug. 18, 2009 August 27, 2010
Number of Options Granted 1,134,119 1,640,285 1,382,630 1,605,757
Percentage of Shares Exercisable to
Outstanding Common Shares
0.08% 0.12% 0.10% 0.12%
Option Duration 10 years 10 years 10 years 10 years
Source of Option Shares New Common Share New Common Share New Common Share New Common Share
Vesting Schedule
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
Shares Exercised 280,882 300,817 80,853 147,841
Value of Shares Exercised 103,376 104,859 34,726 59,846
Shares Unexercised 282,195 481,828 572,517 713,068
Adjusted Exercise Price Per Share (NT$) 358.0 344.5 429.5 404.8
Percentage of Shares Unexercised to
Outstanding Common Shares
0.02% 0.03% 0.04% 0.05%
Impact to
Employee Stock Options Granted 5th Grant 6th Grant 15th Grant 16th Grant
Approval Date by the Securities & Futures
Bureau
May 10, 2010 Aug. 9, 2011 Aug. 9, 2012 Aug. 9, 2013
Issue (Grant) Date Nov. 4, 2010 Aug. 24, 2011 Aug. 14, 2012 Aug. 22, 2013
Number of Options Granted 65,839 2,109,871 1,346,795 1,436,343
Percentage of Shares Exercisable to
Outstanding Common Shares
0.00% 0.16% 0.10% 0.11%
Option Duration 10 years 10 years 10 years 10 years
Source of Option Shares New Common Share New Common Share New Common Share New Common Share
Vesting Schedule
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
2nd Year: Up to 30%
3rd Year: Up to 60%
4th Year: Up to 100%
Shares Exercised 923 345,070 61,449 0
Value of Shares Exercised (NT$) 375 95,722 17,624 0
Shares Unexercised 14,634 1,235,237 1,036,917 1,288,031
Adjusted Exercise Price Per Share (NT$) 377.0 277.4 286.8 368
Percentage of Shares Unexercised to
Outstanding Common Shares
0.00% 0.08% 0.07% 0.08%
MediaTek Inc. | 2014 Annual Report 48
5.2. Employee Stock Option Granted to Management Team and to Top 10 Employees:
As of April 30, 2015 / Unit: share and NT$ thousands
Title Name
Number of
Option
Acquired
Number of
Option
Acquired /
Number of
Option Issued
Exercised Not Exercised
Number
of Option
Exercise
Price
(NT$
Option
amount
Number of
Option /
Number of
Option
Issued
Number
of Option
Exercise
Price
(NT$
Option
amount
Number of
Option /
Number of
Option
Issued
Ke
y
Ma
na
ge
rs
None
Em
plo
ye
e
Bernard
Tenbroek
1,050,455 0.07% 97,540 328.6 32,048 0.01% 952,915 349.5 333,038 0.06%
Esben
Randers
Henry
Vickers
James K
Farley
Joern
Soerensen
John
Finbarr
Moynihan
Jonathan
Strange
Mark Alan
Estabrook
Michael
Ashburn
Zoran
Zvonar
6. Status of New Employees Restricted Stock Issuance:
None
MediaTek Inc. | 2014 Annual Report 49
7. Status of New Shares Issuance in Connection with Mergers
and Acquisitions
7.1. Items to Disclose for Acquisition Completed in 2014 to the Printing Date of this Report
Evaluation Opinion on Acquisitions or New Share Issuance in the Latest Quarter: Not applicable
7.1.2. Execution Status for the Latest Quarter Improvement Plan if the Execution doesn't meet Expectations:
Not applicable
Basic Information for Any Acquisition or Share Exchange Plan Approved by the Board in 2013 to the Printing Date of this Report:
Company Name MStar Semiconductor, Inc.
Company Address 4F-1, No. 26, Tai-Yuan St., ChuPei Hsinchu Hsien, Taiwan
Chairman Wayne Liang
Paid-in Capital (NT$) 5,326,092,320
Major Business Research, manufacturing and sales
Major Products Display-related and communication/networking related ICs
terms of the merger was for one MStar share in exchange for 0.794
On August 26, 2013, the merger between MediaTek and MStar received conditional approval by China's Commerce Ministry. In accordance with the conditional approval, an execution plan was submitted for examination. On November 26, 2013, approval of the execution plan was received, and in January 2014, the supplemental materials of the execution plan were also approved. In January 2014, the board of directors of MediaTek and MStar both agreed to proceed in accordance to the approved execution plan and supplemental materials, which specified that MediaTek acquired control of MStar (the date of
MediaTek Inc. | 2014 Annual Report 50
shares using the equity method was re-measured based on a fair value as of the acquisition date. Any resulting differences would be accounted for as investment disposal gains. Subsequently, in February 2014, in accordance to relevant regulations, MediaTek issued 221,123,877 new shares and paid cash of NT$278,494
outstanding shares. On February 1, 2014, the record date of the acquisition, MStar was delisted from the Taiwan Stock Exchange, and merged into MediaTek, with MediaTek being the continuing company. Since controlling interest of MStar has already been achieved, the issuance of new shares and cash payments for 52% of the outstanding shares would be accounted for as an equity transaction. In accordance to the conditional approval by China's Commerce Ministry, MStar's cell phone IC and other wireless communication businesses can be integrated into MediaTek's operation. TV ICs and other related businesses will continue to operate independently as a subsidiary company of MediaTek, named MStar Semiconductor Inc. (MStar Taiwan). After 3 years, and the fulfillment of the acquisition conditions, MStar Taiwan then may be integrated into MediaTek. Synergies between MediaTek and MStar will mainly be in the wireless and handset IC businesses, through integration of research and development teams, and a combination of resources to improve R&D capabilities, global operations, and product development. As MediaTek continues to strengthen its global leadership, shareholder value will continue to be created from this acquisition.
8. Financing Plans and Implementation
8.1. Uncompleted share issuance or private placement or completed transactions without expected benefits in the past 3 years:
None
MediaTek Inc. | 2014 Annual Report 51
V. Business Activities
1. Business Scope
1.1. Business Scope
1.1.1. The Main Business Activities of MediaTek
A. Design, develop and market the following products:
a. Multimedia Integrated Circuits (IC);
b. Computer peripheral ICs;
c. High-end digital consumer ICs;
d. Other application specific ICs;
e. Patent and circuit-layout licensing and services of the above-mentioned products
B. Provide the above-mentioned products with software and hardware application design, test,
maintenance, and technological consultation services
C. Import and export of the above-mentioned products
1.1.2. Revenue Mix (2014)
Product Category Multimedia Chipsets Others*
Revenue Mix 99.24% 0.76%
*Note: Others include revenue from technical services and licensing fees.
1.1.3. Products Currently Offered by MediaTek
A. Mobile communication chipsets;
B. Tablet chipsets;
C. Bluetooth chips;
D. Wireless LAN (WLAN) chips;
E. Global Positioning Satellite (GPS) chips;
F. NFC (Near Field Communication) SoC;
G. Connectivity combo SoC that integrated Bluetooth, FM, WLAN, GPS, etc
H. Multimode wireless charging chips;
I. Wearable device SoC;
J. Optical storage chipsets;
K. DVD player SoC;
L. Blu-ray DVD player chipsets;
M. Highly-integrated digital TV controller chips;
MediaTek Inc. | 2014 Annual Report 52
N. ATSC and DVB-T TV decoder and demodulator chipsets;
O. xDSL chipsets; and
P. Automotive chipsets
1.1.4. New Products Planned for Development
A. Next generation highly-integrated mobile communication chipsets;
B. Next generation tablet chipsets;
C. Next generation high-integration, high-sensitivity and low power consumption Multi-GNSS
(GPS/GLONASS/Compass/Galileo) receiver chips;
D. Next generation highly-integrated multi-functional wireless communication SoC;
E. Next generation highly-integrated low-power WLAN and WPAN chipsets;
F. Next generation wireless charging chips;
G. Next generation wearable device chips;
H. Next generation highly-integrated Ultra HD smart TV chips;
I. Next generation highly-integrated Blu-ray SoC;
J. Next generation high-speed game console decoder chips;
K. Next generation highly-integrated xPON (X version of Passive Optical Network) chipsets;
L. Next Generation highly-integrated UHG (Universal Home Gateway) chipsets;
M. Next Generation highly-integrated Gigabyte Digital Subscriber Line (G.fast) chipsets; and
N. Next Generation automotive chipsets
1.2. Industry Outlook
1.2.1. The semiconductor manufacturing supply chain:
The semiconductor industry can be categorized as: Upstream IC design companies, midstream wafer
foundries, and downstream IC packaging and testing service providers. The horizontal specialization is
semiconductor companies usually operate vertically across the value chain, from IC design and
manufacturing, to packaging, testing, to systems integration. However, in an industry environment that
evolves rapidly that requires high capital expenditures, Horizontal model is able to focus resources on
specific field rather efficiently to meet industry trends and proves to be an out-performer vis-à-vis the
integrated model.
The major operation of an IC design company is to design and sell semiconductor devices, or to design
ements. IC design is the upstream of the industry value chain,
while other players in the backend of supply chain include photomask providers, wafer foundries,
packaging and testing companies, etc. In general, IC companies outsource almost 100% of photomask,
wafer fabrication, and IC packaging to specialized manufacturing partners. Most companies also
outsource their IC testing work to specialized testing houses, while some IC design companies keeps a
certain portion of testing in-house.
In the semiconductor supply chain, the IC design industry is a knowledge-intensive industry with a
and the ample talents, IC design is a thriving industry in Taiwan.
MediaTek Inc. | 2014 Annual Report 53
1.2.2. Industry Outlook, Trends and Competition
A. Wireless Communications Products
The wireless communication industry is booming and relevant applications are growing, with handset
shipments being the highest value in this industry. According to Strategy Analytics, worldwide handset
shipment has reached 1.8 billion units in 2014 and the number is expected to grow steadily to 2.1 billion
units in 2020, thanks to the growth of smartphone volumes. Strategy Analytics estimates that global
smartphone shipments will be about 1.2 billion units in 2014 and the number is expected to grow to close
to 1.8 billion units in 2020.In addition to mobile phones, other products such as tablets as well as emerging
Internet of Things and wearable devices are also important devices for wireless communications,
concurrently driving the growth of the wireless communication industry.
Handheld devices, whether they are mobile phones, tablets or wearable devices, have quite a high
proportion of built-in wireless communication functions, such as Bluetooth, WLAN, GPS, with the
technology continuing to improve. In addition, new features like NFC and wireless charging are also
gradually favored, with these peripheral chips providing an important growth driver as well.
(In million units) Worldwide Handset Shipment Forecast
Source: Strategy Analytics, September 2014
(In million units) Worldwide Smartphone Shipment Forecast
Source: Strategy Analytics, September 2014
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2014 2015 2016 2017 2018 2019 2020
1,000
1,200
1,400
1,600
1,800
2,000
2014 2015 2016 2017 2018 2019 2020
MediaTek Inc. | 2014 Annual Report 54
Global communication technology continues to evolve and upgrade with global carriers rolling out 4G
networks offering users even faster data speeds. This trend is expected to drive the rise of Internet-
related applications, and spark the next wave of phone replacement purchases. Moreover, 3G network in
emerging markets is more mature, and feature phones have been widely replaced by smart phones in
most countries to further increase penetration of smart phones.
With increasing popularity of mobile network and rapid transmission speed, consumers have higher
requests for smart phones and tablets. Aside from voice communication and camera functionality,
applications such as video streaming, social networking, online gaming, multimedia data editing, data
transmission and sharing, and others rise one after another. The specifications and features of smart
phones and tablets continues to be upgraded, such as stronger CPUs, from single core to Deca-core and
into 64-bit processing, while multimedia functions, like larger screen sizes, higher screen and camera
resolutions, instant focus, and slow forward, becoming another bright spot. In addition to basic functions,
like Wi-Fi, GPS, and Bluetooth, wireless communications adds additional functionality such as NFC,
wireless charging and Wi-Fi upgrades to 11ac, enabling handset manufacturers to launch a wide range of
smartphones and tablets to stimulate end market demand.
The rapidly growing wireless communication markets comes with intense competition, primarily from
semiconductor companies in the US, Europe, Mainland China and Taiwan. Not only will semiconductor
companies have to keep up with new technology standards and launch more advanced products to
compete but also need to compete on cost optimization and technical support to offer the best total
solutions to customers.
For smartphone products, MediaTek will establish partnerships with worldwide operators and distribution
channels to aggressively develop 3G and 4G mobile communication technologies to expand the global
market. For legacy feature phones, MediaTek will continue its efforts in building more features into
products to achieve a higher level of differentiation for customers. On the tablet front, MediaTek will
further optimize multimedia functionalities and enhance performance to expand market size. As for
Bluetooth, WLAN, GPS, NFC, wireless charging, and other peripheral chips, MediaTek will enhance product
competitiveness by supporting the latest standards and will expand to other consumer electronic
platforms such as e-books, game consoles, TVs, set-top boxes, digital cameras, etc.
B. Digital TV Products
Global television broadcasting has gradually switched from analog to digital signals, and smart TVs are
brining additional interactivity to user experiences. With Ultra High Definition (UHD) becoming a mature
technology, global digital flat panel TV shipments is still enjoying gradual growth.
Smart devices, such as mobile phones or tablets continue to grow strongly. Sharing audio and video
contents through multi-screen applications are becoming the latest trend, while applications taking
advantage of intelligent devices to control the TV are also popular.
After the specifications of the UHD coding and decoding technology has been published, content
providers, TV operators, and video streaming services are aggressively preparing for UHD videos and
expect further UHD TV sales growth.
MediaTek leads the industry in launching multi-core smart TV SoCs supporting UHD. MediaTek also
cooperates with Google on Android TVs. which were adopted by various international brands to continue
-leading position.
C. Digital Consumer Products
Traditional DVD players are gradually replaced by more and more online video and audio streaming
services. Along with the popularity of OTT boxes and smart TV, consumers are changing their ways of
MediaTek Inc. | 2014 Annual Report 55
enjoying movies. Even though the need of DVD players are decreasing, the excellent specifications of Blu-
.
D. Optical Storage Industry
The PC industry changes quickly. Optical disc shipment volume and market prospects are impacted by the
newly-emerging form factors such as ultra-thin notebook and tablets that do not carry optical discs. DVD-
Rewritable, the existing main optical storage product, is a mature product. Although there remains
competitors in this sector, MediaTek maintains a high market share by enhancing its core competitiveness
and customer service.
Despite the optical disc market for IT has saturated, the end demand for optical disc remains stable due to
its convenience for consumers. MediaTek will leverage its experience and use the spirit of innovation and
.
E. Broadband Networking
The global broadband industry continues to grow, thanks to the increasing number of broadband users.
According to Point-Topic research, at the end of third quarter 2014 there are approximately 700 million
global broadband users, which more than 200 million users in Mainland China, with a CAGR of 6.2%. The
leading technology is FTTH.
Global Broadband Users (Accumulative)
Despite the boost of FTTH (Fiber To The Home) era, it remains inaccessible for users in some regions,
resulting from technical difficulties, high labor costs and potential damage to house decorations. As a
result, FTTdp technique was brought to the light. The solution was able to provide a bandwidth at
200~500Mbps with copper conductor and VDSL & G.fast technique, enabling it to compete in high speed
.
1.3. Technology and R&D
1.3.1. R&D Spending
4 was NT$ 43,337,348 thousand, and from January 1st 2015 to the
printing date of this annual report, the R&D spending was NT$ 14,473,364 thousand.
1.3.2. Developed Technologies or Products in the Last Fiscal Year and Year-to-Date
A. Highly integrated GSM/GPRS SoC for multimedia phones;
B. Highly integrated WCDMA/TD-SCDMA chipsets for smartphones;
C. Highly integrated LTE chipsets;
MediaTek Inc. | 2014 Annual Report 56
D. Highly integrated tablet chipsets;
E. Highly integrated WLAN SoC;
F. Highly performance/Cost NFC chips;
G. Highly performance/Cost multifunction wireless communication SoC;
H. Multi-mode wireless chargingchips;
I. Highly integrated 24x DVD-Rewritable SoC;
J. Highly integrated 3D Blu-ray DVD player SoC;
K. Highly integrated UHDTV chipsets;and
L. Highly integrated UHG chipsets.
1.4. Long- and Short-Term Business Development Plans
1.4.1. Short-Term Business Development Plans
A. Continue to develop competitive mainstream products, adopt more advanced process nodes and
optimize circuit design to meet the market demand.
B. Fully understan -integrated
services to facilitate customers to time to market and seize market opportunities.
C. Enhance existing long-term partnerships with customers/operator as well as expand the
customer base and market share by implementing efficient marketing strategies.
D. Maintain close relationship with the supply chain including foundries, packaging and testing
houses. Ensure real-time communications with customers and manufacturing partners to
respond to market changes quickly and effectively, secure sufficient capacity, ensure smooth
delivery and AR/inventory management.
E. Sustain systematic and flexible financial systems to support all RD and sales activities.
1.4.2. Long-Term Business Development Plans
A. Participate actively in global standard committees and strengthen long-term cooperation with
international customers to develop diversified business opportunities.
B. Continue to develop innovative products and maintain a market-leading position in different
markets.
C. Continue to work closely with the supply chain and further develop cost-effective solutions.
D. Recruit and retain global talents with different expertise for future products and market
development. Establish complete internal training systems to share knowledge and experiences.
E. Establish comprehensive global management systems to ensure effective internal and external
communications. Sustain good relationship with capital markets and seek targets for further sales
developments.
MediaTek Inc. | 2014 Annual Report 57
2. Market, Production, and Sales Outlook
2.1. Market Analyst
2.1.1. Major Markets
Region 2014
Sales (NT$1,000) Percentage
Export sales 204,223,636 95.85%
Domestic sales 8,839,280 4.15%
Total 213,062,916 100%
2.1.2. Market Share
According to a report IHS iSippli published in Dec 2014, the worldwide semiconductor market
revenue was US$719.4 billion in 2014; 2.0% and ranked No.10
15.
2.1.3. Major Markets
A. Wireless Communications Products
The wireless communication industry, especially smartphone and tablet markets, is expected to
continue to grow, thanks to the increasing popularity of 3G network as well as the takeoff of 4G
network. Customers are focusing more on products specifications, driving the need for enhanced
efficiency of CPU and GPUs, high-speed transmission of wireless communication and integration
with high-performance processors. The demand for integration of Bluetooth, WLAN, GPS, NFC, and
wireless charging is expected to increase further and expand to other customer electronics such
as e-books, gaming devices, TVs, set-top boxes, digital cameras, etc.
B. Digital TV
The demand for digital TV ICs is expected to increase, driven by the growing smart TV penetration
and the growth momentum of UHD TVs. By providing the most highly-integrated digital TV SoC,
MediaTek has not only penetrated international tier-
successfully established long-term strategic partnerships with customers to maintain a market
leading position.
C. Digital Consumer Products
MediaTek has established leading positions in the DVD and Blu-ray player IC market. For the future
Blu-ray DVD player market, other than traditional disc rental, sources of high definition contents
include online video/audio streaming services that are gaining popularity. Blu-ray can be regarded
as a set-top box with disc broadcast functionality so as to maintain its market share. MediaTek
expects to maintain the leading position by continuously developing competitive products with
high integration and new features as well as establishing long-term relationships with important
electronic consumer companies.
D. Optical Storage Products
MediaTek is currently the only fabless company in the world that can provide a complete range of
products, ranging from CD-ROM controller ICs, DVD-Rewritable products to the latest Blu-ray DVD
-to-
market and time-to-profit. This is why MediaTek has been able to maintain a leading position
despite stiff competition. Economics of scale is a key success factor in the optical storage industry.
MediaTek Inc. | 2014 Annual Report 58
MediaTek is committed to maintaining a close relationship with customers and also offer better
services to maintain its market leadership.
E. Broadband Networking
Mainland China promoted FTTH technology as its major network infrastructure, which resulted in
fast adoption of FTTH and decreasing ADSL sales. Optical fiber is now taking a large share and
replacing copper-made wire products. To catch up with the trend, MedaiTek xPON solutions had
passed drop test and started to deliver in dozens of provinces in 2014 with increasing sale and
share gain to continue in 2015.
In the VDSL2 market, after MediaTek made a breakthrough in overseas telecommunication
operator business in 2014, the latest generation of integrated VDSL2 terminal solutions has
succeeded in delivering to procurement projects. Volume is expected to increase further in 2015
as increasing demand from overseas operators for network testing.
2.1.4. Competitive Advantage
A. Outstanding Team
management team has been working together in the multimedia industry for years
and has grown with the participation of outstanding talents. Many of our staff consists of senior IC
design and system engineers. The exceptional quality of human resources and team spirit
developed through long-term cooperation are the key factors that have enabled MediaTek to
-term prosperity, and deliver continuous
innovation.
B. Strength in System-on-a-Chip (SoC) Development
SoC has been a hot topic of the technology industry for many years. MediaTek has a large pool of
talented IC and system designers. Through their joint efforts, we have been able to launch
competitive SoC products every year.
2.1.5 Favorable Developments, Unfavorable Factors and Countermeasures
Favorable Developments
A. Smartphones and Tablet are Expected to Become Mainstream with a New Wave of
Replacement Demand Stimulated by 4G Communication
Handheld devices such as smartphones and tablets are getting popular and driving growth for
relevant semiconductor industries. MediaTek has continuously developed mobile phones and
appetite for richer multimedia features is a positive factor for MediaTek's peripheral chips such as
Bluetooth, FM, WLAN, GPS, NFC and wireless charging, among others. MediaTek is able to
leverage and integrate wireless communication technologies with the solid multimedia features
-
integrated total solutions.
Additionally, MediaTek has aggressively invested in 4G technologies and successfully launched
world-mode 4G chipsets which can support FDD-LTE, TDD-LTE, WCDMA, TD-SCDMA,
CDMA2000/EVDO, and GSM. As Mainland China expands and continues to migrate to 4G networks,
we expect higher data speed and smoother data transmission will enable consumers to enjoy
richer multimedia features as well as . This will also attract more users to upgrade from 3G to 4G
and trigger the next wave of replacement demand to drive the growth of wireless
telecommunication chipsets.
MediaTek Inc. | 2014 Annual Report 59
B. UHD TVs to Become the Focus of Home Entertainment Centers
After the announcement of decoding specifications for UHD TVs, service providers are
aggressively expanding distribution channels to demonstrate the enhanced picture quality which
making UHD TVs to become the focus of home entertainment centers. Integrating that with
Smart TV, users can enjoy Internet browsing, video on demand, video phone, installing apps and
games on TVs, and voice searching, as well as take advantage of smart devices to control the TV
to achieve a better user experience.
C. xPon and VDSL to Become Growth Drivers for the Broadband Market
ADSL is now still the prevailing broadband technology. However, ADSL shipments start to
decrease and xPON and VDSL have emerged as newer technologies, together reaching nearly 50%
of the market and is expected to be higher than 50% in 2015 in a market with steady growth.
D. Comprehensive IC Manufacturing Infrastructure in Taiwan
Taiwan has a well-developed IT industry and world leading IC manufacturing capability. The large
demand in emerging m
needs.
Unfavorable Factors and Countermeasures
The IT industry moves at a fast pace and new technology may emerge at any time. As a result, the
lifecycle of our products maybe be cut short and the pricing pressures may increase. In the
extremely competitive technology industry, MediaTek is always prepared and has been intensively
developing new products, improving competitiveness, and providing better products from high-
quality employees. In addition to continuing to market our existing products, we also work
proactively on next generation products. We aim to increase our competitiveness by bringing
high-quality products to the market ahead of our competitors.
2.2 Key Product Applications and Manufacturing Processes
2.2.1 Key Product Applications
electronics, optical storage and broadband networking for applications such as smartphones,
digital TVs, PCs and various consumer electronics. Key product applications are listed below:
A. Wireless Communication
wireless communication chipsets are mainly used in entry-level, mainstream and
mid/high end FDD-LTE/ TDD-LTE/ WCDMA/ TD-SCDMA/ CDMA2000/ EVDO/ EDGE smartphones
and tablets as well as GSM/ GPRS/ EDGE/ WCDMA/ HSUPA/ TD-SCDMA feature phones.
Peripheral chips such as Bluetooth, WLAN,GPS, NFC and wireless charging are mainly used in
mobile phones, but can also be used in other applications such as game consoles, notebook
computers, mobile TVs, e-book readers, and portable navigation devices, etc.
MediaTek Inc. | 2014 Annual Report 60
B. Digital TV
Digital TV decoder chips and demodulator chips are used to receive and decode digital TV signals
for VOD and video phone and provide users with the best in audio and video enjoyment by
strengthening the processing engine of image quality.
C. Digital Consumer Products
DVD player SOCs are mainly used in digital home appliances for DVD players. BD-Player SOCs are
mainly used in higher resolution and richer functionality next-generation Blu-ray DVD players.
D. Optical Storage
DVD-ROM chipsets have two major applications. The first is in game console storage devices and
the other in multimedia PC storage devices. DVD-Rewritable chipsets are used in high-end PC
storage devices and recordable DVD players. BD chipsets are used in high-end PC storage devices
and embedded Blu-ray optical disc drives in high-end TVs.
E. Broadband Networking
xDSL chipsets are used in digital modems which can be further categorized into the following by
functionality: DSL Modem (purely for bridging purpose), Wired DSL Router(DSL Modem integrating
routing function), Wireless DSL Gateway (DSL home gateway integrating WLAN function) and IAD
Gateway (DSL home gateway integrating VoIP function). Besides, GPON/EPON chipsets are used in
fiber-optic high-end modems and provide multiple kinds of functions such as
Modem/Wireless/IAD.
With the rise of the concept of IOT things, Mediatek's chipsets also can be applied to smart home
gateway, providing Smart Home services.
2.2.2. Key Product Manufacturing Process
The chart below shows the process of developing an IC product:
A. Design Process
After the product specifications being defined, IC design engineers will start doing the circuit
design, using computer-aided design (CAD) tools. Their job is to a blueprint that can be placed into
production.
W afer Lead Frame / W ire Bonding
Circuit Design
Simulation Circuit Layout
CAD Tape-
out
MediaTek Inc. | 2014 Annual Report 61
B. Photomask Process
Finished IC circuit designs are stored in a tape as a database for a masking company to produce
the mask sets. There are four stages in the manufacturing of mask: Glass Process, Cr Film Coating,
Resist Coating and Shipping. The finished masks are then delivered to a wafer foundry.
C. Wafer Foundry Process
Wafer fabrication is outsourced to foundries. The wafer manufacturing process begins by entering
a module, going through etching, photo, thin film and diffusion with masks. The finished wafers
must be tested before shipping to the next stage.
D. Wafer Testing Process
A finished wafer must be checked for conformity in its electronic functions. Non-functional dies
will be marked and sorted out later.
E. Packaging Process
The good dies on the wafer will go through the final packaging and testing process as indicated
below:
2.3. Supply of Essential Raw Materials Wafers are our major raw materials and they are mainly procured from our foundry partners, including
Taiwan Semiconductor Manufacturing Limited Company (TSMC), United Microelectronics Corporation
(UMC), Global Foundries and Dongbu Electronics (DBE). These suppliers have been able to maintain good
according to the market supply and demand conditions. We also review the production and service quality
periodically with our suppliers. MediaTek not only continues to strengthen our cooperation with existing
manufacturing partners, we also actively survey and contact other potential suppliers to ensure secured
supply, high quality, and low cost procurement.
2.4. Key Supplies & Customers
2.4.1. Key Suppliers
Names of suppliers accounting for more than 10% of the total purchase in any of the previous two years:
2013 2014 2015.Q1
Supplier Amount
Purchased
(NT$1,000)
% of
Total
Purchase
Relation Supplier Amount
Purchased
(NT$1,000)
% of
Total
Purchase
Relation Supplier Amount
Purchased
(NT$1,000)
% of
Total
Purchase
Relation
Supplier
A
31,734,137 69.05% Not Related
Parties
Supplier
A
51,968,072 63.62% Not Related
Parties
Supplier
A
15,710,888 67.18% Not Related
Parties
Supplier
B
7,871,563 17.13% Not Related
Parties
Supplier
C
9,920,407 12.15% Not Related
Parties
Supplier
C
2,789,435 11.93% Not Related
Parties
Others 6,353,579 13.82% Others 19,793,893 24.23% Others 4,885,917 20.89%
Total 45,959,279 100.00% Total 81,682,372 100.00% Total 23,386,240 100.00%
Wafer Mount Die Saw Die Bond Wire Bond Molding
Branding Solder/ Plating
Trimming/ Dejunking
Final Test Packing & Shipping
MediaTek Inc. | 2014 Annual Report 62
2.4.2. Key Customers
Names of customers accounting for more than 10% of the total sales in any of the previous two years:
2013 2014 2015.Q1
Customer Sales
(NT$1,000)
% of
Total
Revenue
Relation Customer Sales
(NT$1,000)
% of
Total
Revenue
Relation Customer Sales
(NT$1,000)
% of
Total
Revenue
Relation
Customer
A
20,855,656 15.33% Not Related
Parties
Customer
B
14,004,694 10.29% Not Related
Parties
Others 101,195,604 74.38% Others 213,062,916 100.00% Others 47,531,221 100.00%
Total 136,055,954 100.00% Total 213,062,916 100.00% Total 47,531,221 100.00%
Note: There are not any customers for more than 10% of the total sales in 2014 and 2015 Q1.
2.5. Production Volume and Value in the Past Two Years
2013 2014
Production
Capacity
Production
Volume
(1,000 pieces)
Production
Value
(NT$1,000)
Production
Capacity
Production
Volume
(1,000 pieces)
Production
Value
(NT$1,000)
Multimedia
and Handset
Chipsets
N/A 2,172,623 71,726,876 N/A 3,668,889 111,755,113
no in-house production
capacity.
2.6. Sales Volume and Value in the Past Two Years
2013 2014
Domestic Sales Export Sales Domestic Sales Export Sales
Volume
(1,000
pieces)
Value
(NT$1,000)
Volume
(1,000
pieces)
Value
(NT$1,000)
Volume
(1,000
pieces)
Value
(NT$1,000)
Volume
(1,000
pieces)
Value
(NT$1,000)
Multimedia
and handset
Chipsets 94,768 8,666,483 2,066,944 126,327,532 123,699 8,820,747 3,197,614 202,614,951
Others N/A 24,417 N/A 1,037,522 N/A 18,533 N/A 1,608,685
Total 94,768 8,690,900 2,066,944 127,365,054 123,699 8,839,280 3,197,614 204,223,636
MediaTek Inc. | 2014 Annual Report 63
3. Employees
2013 2014 2015
(As of April 30)
Number of
Employees
Management 389 814 855
R&D 6,262 10,701 11,255
Sales & Marketing 277 432 462
Manufacturing 137 167 176
Total 7,065 12,114 12,748
Average Age 33 33 33
Average Years of Service 4.4 4.0 4.1
Education
Doctoral 5.80% 5.39% 5.47%
Master 65.00% 65.85% 66.07%
University & College 28.78% 28.22% 27.94%
High School 0.42% 0.54% 0.52%
Total 100.00% 100.00% 100.00%
* exclude MStar employees
MediaTek Inc. | 2014 Annual Report 64
4. Important Contracts
Agreement Type Counterparty Term Summary Restrictions
Licensing &
Settlement
ESS Technology
International, Inc. and
ESS Technology, Inc.
Permanently
effective from
June 11, 2003
MediaTek licensed ESS
technology and settled the
legal dispute
None
Licensing Zoran Corporation and
Oak Technology, Inc
Permanently
effective from
Jan. 25, 2006 certain IP and its derivative IP
None.
Investment NuCORE Technology
Inc.
From April 19,
2007
MediaTek acquired 69% of
NuCORE shares None.
Acquiring Assets Analog Devices, Inc. Sep. 10, 2007 baseband chipset operations
None.
IP Agreement Qualcomm Nov. 30, 2009
Patent agreement regarding
CDMA and WCDMA core patents
owned individually by both
parties
None
Strategic Alliance AST Technology
(Suzhou) From Jan. 2010
Cooperation in TD-SCDMA
market None.
Settlement British
Telecommunication, BT June 2010
MediaTek has settled the
litigation and signed a
settlement agreement with BT.
BT shall file for dismissal of the
lawsuit and shall forever release
MediaTek and its subsidiaries
from any claims of infringement
of the patent asserted in the
litigation and its related foreign
counterparts, continuations, etc.
worldwide.
None.
Licensing NTT DOCOMO Inc. From July 2010 MediaTek licensed NTT
None.
Acquisition Ralink Technology Corp. March 16, 2011 Acquisition agreement
Under Article 15 of the contract,
the deal shall be approved by
the board and shareholders
meeting of both companies and
be approved by the authority.
Each side shall obey the
commitment, obligation,
agreement in the contract, and
the statements and assurance
shall all be genuine.
Real Estate Beijing Electronic Zone
Ltd.
From May 23,
2011
MediaTek (Beijing) purchased
office building None
Strategic Alliance Yahoo, Inc. From June 1,
2011
To implement Yahoo services to
platform.
None
Investment Spice Digital Ltd. From July 29,
2011
MediaTek Singapore licensed
from Spice Digital None
Real Estate Winsome Development
Corp.
From Feb. 13,
2012
Ralink Technology Corp.
purchased office building None
Patent settlement
and licensing Rambus Inc
From Mar. 5,
2012
Rambus agreed to license
various products and also
revoked all lawsuits
outstanding.
None
MediaTek Inc. | 2014 Annual Report 65
Agreement Type Counterparty Term Summary Restrictions
Acquisition Coresonic AB (Sweden) From Apr. 10,
2012
MediaTek acquired 100% of
None
Investment Softbank Princeville
Investments, L.P.
From Apr. 23,
2012
MediaTek invested US$20
million in Softbank Princeville
Investments, L.P.
None
Strategic Alliance Twitter From July 11,
2012
MediaTek and Twitter
announced global strategic
alliance
None
Real Estate
SCEGC No.7
Construction
Engineering Group
Company Ltd.. Nantong
Installation
Corporation, Excel
Technology (Shanghai)
Co.,Ltd., Shanghai Zhen
Nan Engineering
Supervision Co., Ltd.
From Aug. 3,
2012
MediaTek (Chengdu) engaged 3rd
to build new office building on
rented land
None
Acquisition MStar Semiconductor,
Inc. Aug. 14, 2012 Merger agreement
Article No.13 in the merger
agreement: This Agreement
shall become effective after
approval by the respective
parties in accordance with
related laws and regulations.
Nonetheless, prior to the
shareholders meeting, the
obligation to take action or take
no action as specified in this
Agreement shall have a binding
effect, and both parties shall
perform such obligation based
on the principle of honesty and
good faith.
Settlement
Agreement
FocalTech(Shenzhen)
System, Ltd.
From Jul. 31,
2014 Revoked by both sides None
Real Estate Neo Solar Power Corp. From Aug. 18,
2014
MediaTek purchased office
building None
Patent Settlement
and Licensing
Freescale
Semiconductor, Ltd.
From Sep. 22,
2014
Accomplished a specified patent
cross-licensing agreement and
agreed to revoke all patent
lawsuits by both sides.
None
Real Estate China Resources Land
Limited (Shenzhen)
From Nov. 17,
2014
MediaTek (Shenzhen) Inc.
purchased office building None
Real Estate Shenzhen Investment
Holdings Co., Ltd.
From Dec. 8,
2014
MediaTek (Shenzhen) Inc.
purchased office building None
Real Estate
Poly Real Estate Group
Company Limited
(Shanghai)
From Dec. 9,
2014
Mstar Chen Si Electronics
Technology (Shanghai) Co., Ltd purchased office building
None
Real Estate
Jiangsu Wannianda
Construction Group
Ltd., United Integrated
Services, Shanghai Zhen
Nan Engineering
Supervision Co., Ltd.
From Jan. 1,
2015
MediaTek (Heifei) Inc. engaged
3rd to build new office building
on rented land
None
Superficies Right Bureau of High Speed
Rail, MOTC
From Feb. 12,
2015 to Feb. 11,
2060
The Company acquires superficies right to develop
buildings and manage the
project of HSR Hsinchu
specified areas.
None
MediaTek Inc. | 2014 Annual Report 66
VI. Corporate Social Responsibility
1. Corporate Promise
1.1. Employee Relations
employees. The designated Employee Relations Department is responsible for planning, promoting, and
implementing initiatives that lead to a positive and proactive relationship with our employees. We believe,
framework for how MediaTek
manages its employee relations is as follows:
A. Communication with Employees
A variety of mechanisms are in place for the purpose of communication between employees and
supervisors as well as evaluating the effectiveness of communication. Some of the initiatives include
-person and electronically. These
initiatives are carried in a matrix-type framework so that employees can better understand and carry out
cies, while improving the work environment. Open around the clock and 365 days per year,
regular face-to-face meetings are held for employee representatives to meet with top management to
response and discuss major topics. These initiatives and mechanisms are integral to a healthy
communication between MediaTek and its employees as well as a cohesive environment.
B. Employee Cohesiveness
Beside the formal channels of communication, MediaTek also hosts different types of events. There are
company sponsored events such as year-end parties, anniversaries and MediaTek family days; holiday
-Autumn Festival, Christmas; and departmental activities such as
s, department outings and joint birthday celebrations, group outings and club
events, etc. Those activities are designed to fit needs of different employee groups so that we can have
more participation from employees and their families and also strengthen the interaction and connection
between employees. Since MediaTek began promoting various employee clubs, there are 38 clubs running
in total, including a newly established open source data research club in 2015. With more than half of our
employees belonging to at least one club, MediaTek effectively promotes the expansion of these clubs
through company reimbursements and allowances. These clubs are highly valued as they create
employee cohesion and a sense of community.
C. Work Environment Safety and Employee Healthcare
Each employee can refer to the regulations and documents of labor health and safety which are posted
on the corporate intranet. The environmental management council was set up to deliver training and
concepts of disaster prevention to employees.
committed to promote both the mental and physical health of its employees. In terms of physical health,
MediaTek has provided high quality health checks and post-check consultations to its employees for the
past ten consecutive years. Higher-risk groups such as executives, female staff, and testing staff receive
additional testing such as eyesight checks, mammograms, cervical smear tests, and blood lead
concentration tests, etc. The focus is placed on preventive care so that effective treatments can be given
MediaTek Inc. | 2014 Annual Report 67
before actual symptoms occur. On the other hand, there are also professional doctors providing online
health consulting service and clinical services, which could offer employees reliable medical information.
Also, MediaTek provided each department exclusive medical session resource, so that executives could
give appropriate medical information f
MediaTek places equal emphasis on the physiological aspect of overall healthcare. Employees are
encouraged to use onsite fitness centers or participate in cross-departmental competitions. MediaTek
also designs different programs targeting at different employees who regularly or rarely exercise. This
type of initiative is aimed at helping the staff develop regular exercise routines. The utilization rate for the
various sports facilities at the Health & Lifestyle Center (including a fitness center, badminton court,
basketball court, table tennis room, aerobics room) is currently near 100% in the evenings; MediaTek starts
to offer additional service hours at noon and on holidays in 2014 due to the growing number of employees
and sports demand. We also hire blind masseurs recommended by the Taipei Association of Blind
Masseurs whose services are provided inside the fitness center.
On the mental aspect of overall healthcare, in order to relieve the mental strain of employees while
encountering emergency matters, MediaTek provides emergency relief measures, holding mental health
lectures and an assessment service based on the Mental Stress Index. We have also signed contracts with
professional Employee Assistance Program to let employees acquire professional consultancy and
assistance without pressure, under the conditions of privacy protection.
D. Employee Services
an employee-
personal needs. There are authorized stores, ticket/gift certificate ordering services, and concierge
services that help employees plan for wedding parties/baby showers. These thoughtful services help
employees save a great deal of time and stress. Meanwhile, employees also can understand the
comprehensive caring culture within MediaTek.
E. Care for the Employees and Their Families
The Employee Relations Department provides one-on-one care and assistance to individual employee
issues and needs. The services provided by the department range from emergency assistance (such as car
Satisfac -than-average results and further diagnoses
help the department take necessary rectification measures.
Also, MediaTek understands that behind every hard-
community for the employee families and provide information such as medical care, childcare and
education, apartment rental and home buying, etc. There is also a family activity room in the Health-and-
Life-Style Center where families can organize their own classes and create a strong bond amongst the
community. Take 2014 for example, there were seven classes organized, including family study group, art
03 people participating.
F. Employee Welfare Committee
MediaTek has established an Employee Welfare Committee (herein referred to as the Committee) in
ing those
MediaTek Inc. | 2014 Annual Report 68
activities. The Committee aims to organize a wide-range of activities that achieve both employee
cohesiveness and personal flexibility. For example, the Committee offer allowances for Family Days and
birthday celebrations for each department. It encourages each department to organize team-building
activities for both the staff and their family members. Employees can choose to use their travel
allowances on personal travel or company-
utilization rate of various welfare allowances have exceeded 95%, which reflects the true spirit of the
G. Continuing Education and Training System
MediaTek provides a comprehensive training system. The training system is integra
continuous growth by serving as a learning environment that allows employees to meet their full
(a) Orientation: Orientation hosted by Human Resources Department help new staff learn company
policies, corporate culture, working environment in order to fit in the workplace.
(b) General Training: Fundamental training sessions for employees in all departments and job functions to
meet regulatory and company policy requirements.
(c) Professional Knowledge Training: Training designed for specific profession development according to
different profession such as personal effectiveness, environmental safety, finance and accouting, human
resources, information technology, intellectual property, marketing & sales and quality assurance
management.
(d) Management Training System: The management training system helps managers develop their
training blueprint based on the skills required for their positions.
(e) Technical Engineering Training: Provide various professional technical training programs for engineers
based on assignments they work on and different stages the Company is at.
(f) Personal Effectiveness Training: Help employees utilize personal skills and knowledge, equip
employees with capabilities in multiple functions and enhance working effectiveness.
scores, for them to utilize in working env
(h) External Training: Enhance employee quality and skills to help business development and
complement the insufficiency of internal trainings.
In the latest fiscal year, MediaTek committed NT$14.83 million for the cost of training:
Categories
2014 Jan. 1 to Apr. 30, 2015
Number of
classes
Numbers of
attendees
Hours Total cost
($NT)
Number of
classes
Numbers of
attendees
Hours Total cost
($NT)
Management
ability 76 2,162 10,006
46,121
thousand
21 626 3,723
13,090
thousand
General
Education of
new employees
75 2,965 16,385 24 823 4,967
Professional
ability 70 1,951 3,457 7 237 850
Personal
effectiveness 27 1,049 6,534 10 333 2,187
Language
training 80 592 20,335 31 385 11,750
External training 257 424 6,727 58 80 985
Total 585 9,143 63,444 151 2,484 24,462
H. Retirement system
retirement system was designed in accordance to the Labor Standards Law and the Labor
Pension Act. The retirement system makes monthly reserve deposits into the funds held at the
MediaTek Inc. | 2014 Annual Report 69
Supervisory Committee on Labor Retirement Funds account at the Central Trust of China. Since the
promulgation of the Labor Pension Act on July 1st of 2005, employees have been given the option to stay
with the Old System or the New System (but keep the number of working years). For employees who
chose the New System, the company m
salary statements in accordance with Financial Accounting Standard No.19
ty on the
balance sheet.
1.2. Supplier Management As a responsible corporate citizen, MediaTek is committed to implementing environmental-friendly and
carbon-reducing initiatives on the basis that the quality of products and services are unchanged.
-Friendly and Carbon-
which encompasses four major areas of demands for its suppliers.
This policy demands suppliers to make changes in the areas of design, material, transport, and minor
details. Descriptions of each item are as follows:
A. Design: simplify product structure through green design in order to reduce the use of consumables and
the use of pure gold in IC packaging.
B. Material:
Cert -free material
and reduce the use of chemicals.
C. Transport: Use recyclable material and reduce the use of consumables during the process of loading
and transporting ICs.
D. Minor Details: Inspect the IC manufacturing process to avoid excessive waste of resources, such as
water and electricity.
2. Social Participation
2.1. Social Contributions
2.1.1. Establish the MediaTek Fellowship
MediaTek is deeply committed in its efforts to promote science education. The MediaTek Fellowship was
established in 2002 with the purpose of encouraging graduate students who wish to go on to a Ph.D.
program domestically. The fellowship is intended to reward outstanding graduate students in the field of
electric engineering and information technology. Since 2002, 49 students have received the fellowship,
each receiving NT$35,000~NT$50,000 per month for as long as 48 months. The fellowship allows the
students to dedicate themselves to research. Some of the fellowship recipients have entered the industry
or back to academia and begun making contributions in the field of research.
2.1.2. Establish the MediaTek Cross-Strait Scholarship
Starting from 2009, MediaTek Foundation provides scholarship to cross-strait exchange students and
researchers to fund graduate students, Ph.D. students, and post-doctoral researchers of electronic
engineering, electronic machinery, and computer science related fields. Each year, around 15 candidates
are entitled to up to 12 months of scholarship.
2.1.3. Establish Scholarship for Mainland China Students
To encourage outstanding Mainland China students to pursue master and/or Ph.D. degrees in Taiwan to
enhance cross-strait sharing, MediaTek established scholarship designated for Mainland China students
since 2011.
MediaTek Inc. | 2014 Annual Report 70
2.1.4. Partnership with Academia and Research Publications
MediaTek has made several significant achievements in 2014- Not only did our revenues achieve record
highs, but we were ranked top 10 in global semiconductor industry excluding OEM for the first time, and
Based on this solid foundation, MediaTek
continues to strengthen global operation, and take technology leadership as our priority.
Smart Handheld devices are ubiquitous nowadays. With the enhancement and wide adoption of
computing and connection capabilities, cloud service, multi-functions of IP Multimedia Subsystem (IMS),
big data transmission, mobile communication and Internet of things are becoming key technological
research topics. To cover various technology fields, MediaTek expand the Academia partnership with
National Taiwan University (NTU), National Tsing Hua University (NTHU) and National Chiao Tung
University (NCTU) to establish Innovation Research Center with each school conducting nearly 30
research projects per year on fields such as Smart Handheld devices, high performance yet low power
consumption, packaging and assembly technologies, and so on. As of 2014, MediaTek has invested over
NT$100 millions in academia partnership.
In addition, MediaTek also participates at the major alliances between academia and industry led by
Ministry of Science and Technology, which focuses on resolving practical problems by applying academic
research results to enhance technology industries. MediaTek and NTU join forces in Key
Enabling Technology for Next Generation Mobile Communication Terminal Project one of
SDN-enabled Cloud-based Wireless and Broadband Network
Technologies & Services Project . These two projects were both approved by Ministry of Science and
Technology and were kicked off in October 2014. MediaTek is expecting to invest nearly NT$200 million in
the projects in the following 3 years. Key Enabling Technology for Next Generation Mobile
Communication Terminal Project
Master and PhD students participating and the focus is on development of core technologies of Hybrid
computing platform and 5G technology. By leveraging the resource from the academia, MediaTek aims to
develop high capacity, high speed and low power consumption technologies and prepare key intellectual
property plan to achieve a global leading position in 5G technology field among global competitors.
Besides the establishment of innovation research centers and participation of major alliances between
academia and industry, MediaTek maintains close and long-term relationship with the universities.
Through participating in different projects before pursuing a career, students can easily grab the
knowledge of how a company runs and significantly reduce time in exploring. In turn, it becomes a critical
way to cultivate manpower. MediaTek has been implementing Industry-academy cooperation over ten
years, and every proposal showcases our commitment and record in social participation. From the applied
number of patents, the number of articles selected by ISSCC, and competitive scores of our scholarship
students, MediaTek also attracts a considerable number of quality students to join our Company after
their education. This displays the win-win result on both the industry and the academia sides.
MediaTek has always been committed to talent incubation, not only raising budgets for industry-
academia cooperation projects, but also set up MediaTek Fellowship to grant scholarships to qualified
Ph.D. students with a four-year scholarship. The aim is to encourage students to pursue Ph.D. Degree to
MediaTek hopes to further incubate Ph.D. talents for Taiwan to develop advanced technologies.
Nevertheless, the Company is also active in research and development. In 2014, MediaTek has 5 papers
being selected by IEEE International Solid-State Circuits Conference (ISSCC). From 2004, the Company had
MediaTek Inc. | 2014 Annual Report 71
presented forty papers in ISSCC, and is the only company which presented papers in ISSCC for twelve
years consecutively.
2.1.5. General Education on Sciences Promotion
Since 2009, MediaTek has sponsored National Tsing Hua University and National Pingbei Senior High
School with the "Small Tsing Hua Plan", a project to enhance the educational level of remote countries
based on the concept of General Science Promotion. We also sponsored Wu Chien Shiung Camps held by
NTHUEE and establishing the Foundation of Senior-high Electrical Scientific Education. Devoting to
building the foundation of General Science Education and nurturing future talents, MediaTek held
General Science beginning from
2013.
2.2. Community Involvement
2.2.1. Promoting Cultural Activities Exclusive Sponsor for IC Radio Broadcasting
MediaTek is the exclusive sponsor for two IC Radio Broadcasting programs. It is the Company's belief that
great ideas and concepts can change the world, but changing social disorder will depend on the respect of
ope the in-depth analysis of
historical personage and clear allegorical lessons in the programs can deliver best practices based on
history, positive value judgments, and the inward reflections of listeners to improve society and
community by through the power of media by spreading positive messages. During the sharing process,
the audience may cultivate independent judgments and society participation, taking part in topics of
interest proactively, and develop civic identity with the aim to further enhance the quality of life.
2.2.2. Save a Life by Donating Blood 2014 Blood Drive
“
employees proactively. Since 2007, MediaTek employees have organized regular blood drives to the
Hsinchu Blood Center during periods of low supply.
In order to 4, MediaTek held two campaigns of blood
donations and received 661 bags of blood (165,250 cc), not only achieving a new record of blood donation,
but also receiving an award from the Blood Center. The Company will remain committed to such activities
in the future.
2.2.3. Volunteer Team
MediaTek employees have been involving in many different employee volunteer programs including
interaction with the RenAi Special Education Center in 2003, plantation of organic vegetables with
HuaKuang Special Education Center in 2004, participation in greening, cleaning and arrangement of
volunteer services in 2007. Since 2011, MediaTek organizes volunteer clubs to promote a volunteering
spirit throughout the Company by caring for elders programs, orphanage visits, or taking part in love and
care activities and accompanying disadvantaged children, etc. MediaTek continuously provides aid and
care for disadvantaged groups and expands the spirit of social contribution actively through long-term
volunteering services held by the employees.
2.2.4. Environmental Activities
MediaTek cares about environmental issues and has been actively involved in various environmental
activities such as that promote personal cutlery for all employees, and reduced use of disposable cutlery.
MediaTek Inc. | 2014 Annual Report 72
In addition to internal activities, we also participate in many external activities. For example, the Company
cooperated with non-government conservation organizations and held a tour of knowing native plants to
encourage employees with their family to participate in activities of World Earth Day. The volunteer club
also held clean mountain activities to appeal to colleagues to devote themselves to environmental
protection..
3. Environmental Efforts
3.1. Long-Term and Short-Term Goals
3.1.1. Short-Term Environmental Goals
-term environmental goals are to implement green product design, packaging, and
procurement to reduce waste in resources and energy, as well as participate in international
environmental activities.
3.1.2. Mid-Term Environmental Goals
Mid-term environmental goals are to strengthen training in the areas of environment, safety, and health.
Employees are encouraged to reduce and recycle material and reduce their carbon footprint. The
importance of occupational health and safety is also impressed upon the entire staff.
3.1.3. Long-Term Environmental Goals
Long-term environmental goals are to fully comply with regulatory environmental rules to implement
green design for our products, avoid any toxic material, and strengthen green purchasing and green
management. We further aim to establish a comprehensive audit system to regularly inspect processes
and implement improvements continuously.
3.2. -Savings Measures and Results MediaTek believes that being environmentally friendly and reducing the carbon footprint is part of its
3.2.1. Efforts in energy reduction
A. Electric Power
electricity tiered pricing from 2-tiered pricing to 3-tiered pricing which led to an annual saving of
approximately NT$5.78 million.
B. Air Conditioning
(a) Reduced waste in air conditioning by enhancing design of the energy room and establishing
hot and cold aisles of cabinets. Saved energy usage by 7.9%, which translates to about
NT$3.65 million a year in savings.
system saves 25.7% more energy, which translates to about NT$1.73 million a year.
(c) Enhanced energy savings on exhaust systems, modifying into two operating periods, off-peak
and half-spike, which led to an annual saving of approximately NT$160,000.
(d) Adjusted ice water system, changing the constant flow to variable flow, which led to an
annual saving of around 2.03 million.
MediaTek Inc. | 2014 Annual Report 73
C. Lighting
(a) Lighting control in public areas and parking structures use lighting that is CNS compliant and
approved by the Energy Bureau. These measures led to an annual saving of approximately
NT$1.77 million.
(b) Controlled parking area lighting on the weekends led to an annual saving of approximately
NT$2.67 million.
D. Equipment
(a) Controlled temperature and humidity for testing and storage areas. Implemented measures
to reduce hose pressure, control temperature and humidity which led to an annual saving of
approximately NT$1.89 million.
(b) Enhanced ice supply machine, using the temperature difference, running hours, and the times
of turn-on and turn-off, etc., led to an annual saving of approximately 2.14 million.
(c) Improved lighting equipment, replacing FL lighting with LED, which led to an annual saving of
approximately NT$240,000.
(d) Improved facilities and machines, replacing Cadence Server air-cooled air conditioning with
water-cooled air conditioning, which led to an annual saving of approximately NT$120,000
per each air conditioner.
The Company reduced 3,833 tons carbon dioxide emissions in 2014 (a savings of 7,340,000 kWh,
equivalent to 10.4 Daan
calculating standard of the aforementioned carbon dioxide emissions is based on the latest
release of Bureau of Energy, MOEA in 2013, which one unit of electricity equals to 0.522
kilograms of carbon dioxide.
3.2.2. Efforts in water saving
(1) Water-saving Faucets: Replaced traditional faucets with water-saving faucets. Usage of
water is reduced by 30.78%, or about 448 tons per year.
(2) Rainwater Recycling: Implemented a rainwater collection storage tank with a two ton
capacity. About 461 tons of water is collected and recycled each year.
(3) Water Reduction: onditioners is reused for plant
watering. Approximately 3,091 tons of condensed water is recycled each year.
3.2.3. Waste Management and Recycling:
The first step is to reduce overall waste, followed by proper sorting, recycling, and re-use. Continual
improvement is also made to waste storage, transport, and processing with an emphasis on reducing the
environmental impact. Waste processing and recycling vendors are first carefully chosen then monitored
and audited at irregular intervals. The company takes full accountability for its waste management.
3.2.4. Others:
The company implements a policy of company-wide recycling, waste sorting, and carbon footprint
reduction.
3.3. Environment Safety Management
A. fire extinguisher/suppression system,
water/electricity system and air-conditioning system around the clock.
MediaTek Inc. | 2014 Annual Report 74
B.
rooms.
C. Regular monthly labor safety and sanitation training for new employees.
D. Promote safety-related concepts and items on an ad-hoc basis.
E. Regular disaster prevention maneuvers for all employees.
F.
MediaTek Inc. | 2014 Annual Report 75
VII. Financial Status, Operating Results and Status of Risk Management
1. Financial Status
1.1. Consolidated Report
Unit: NT$ thousands
Item 2013 2014 Change % of Change
Current Assets 161,740,929 248,554,935 86,814,006 53.67
Funds and Investments 68,039,686 15,000,614 (53,039,072) (77.95)
Property, Plant and
Equipment
11,312,107 23,294,555 11,982,448 105.93
Intangible Assets 15,509,193 60,757,826 45,248,633 291.75
Other Assets 2,034,947 3,510,741 1,475,794 72.52
Total Assets 258,636,862 351,118,671 92,481,809 35.76
Current Liabilities 61,384,592 101,619,838 40,235,246 65.55
Non-current Liabilities 1,898,871 1,893,086 (5,785) (0.30)
Total Liabilities 63,283,463 103,512,924 40,229,461 63.57
Capital Stock 13,497,140 15,714,922 2,217,782 16.43
Capital Reserve 68,474,910 88,047,914 19,573,004 28.58
Retained Earnings 114,294,875 136,855,169 22,560,294 19.74
Other Equity (895,749) 6,606,113 7,501,862 837.50
Treasury Stock (55,970) (55,970) - -
Minority Interest 38,193 437,599 399,406 1,045.76
Total Equity 195,353,399 247,605,747 52,252,348 26.75
Explanation for changes that exceed 20% and reached NT$10 million in the past two years:
(1) Increase in current assets: Mainly due to increase in cash and cash equivalents.
(2) Decrease in funds and investments: Mainly due to obtaining de facto control of MStar
Semiconductor, Inc. (Cayman)
(3) Increase in property, plant and equipment: Mainly due to obtaining property and buildings, and
including MStar Semiconductor, Inc. (Cayman) into consolidated financial statements.
(4) Increase in intangible assets: Mainly due to including MStar Semiconductor, Inc. (Cayman) into
consolidated financial statements owing to acquiring de facto control.
(5) Increase in other assets: Mainly due to increase in deferred tax assets.
(6) Increase in total assets: Mainly due to increase in cash and cash equivalents , property, plant and
equipment as well as intangible assets.
(7) Increase in current liabilities: Mainly due to increase in short-term borrowings, trade payables, other
payables and tax liabilities.
(8) Increase in total liabilities: Mainly due to increase in current liability.
(9) Increase in additional paid-In capital: Mainly due to new share issuance to obtain the remaining
MediaTek Inc. | 2014 Annual Report 76
equity of MStar Semiconductor, Inc. (Cayman)
(10) Increase in retained earnings: Mainly due to increase in net income which is part ially offset by 2013
earnings distribution.
(11) Increase in other equity: Mainly due to foreign exchange movement and market price recovery of
financial assets.
(12) Increase in non-controlling interests: Mainly due to changes in ownership of subsidiaries.
1.2. Parent Company
Unit: NT$ thousands
Item 2013 2014 Change % of Change
Current Assets 70,707,646 149,267,002 78,559,356 111.10
Funds and Investments 144,972,800 129,656,160 (15,316,640) (10.57)
Property, Plant and Equipment 6,331,668 9,177,068 2,845,400 44.94
Intangible Assets 7,242,842 28,740,924 21,498,082 296.82
Other Assets 1,216,985 2,429,791 1,212,806 99.66
Total Assets 230,471,941 319,270,945 88,799,004 38.53
Current Liabilities 33,630,662 70,428,396 36,797,734 109.42
Non-current Liabilities 1,526,073 1,674,401 148,328 9.72
Total Liabilities 35,156,735 72,102,797 36,946,062 105.09
Share Capital 13,497,140 15,714,922 2,217,782 16.43
Capital Reserve 68,474,910 88,047,914 19,573,004 28.58
Retained Earnings 114,294,875 136,855,169 22,560,294 19.74
Other Equity (895,749) 6,606,113 7,501,862 837.50
Treasury Stock (55,970) (55,970) - -
Total Equity 195,315,206 247,168,148 51,852,942 26.55
Explanation for changes that exceed 20% and reached NT$10 million in the past two years:
(1) Increase in current assets: Mainly due to increase in cash and cash equivalents.
(2) Increase in property, plant and equipment: Mainly due to obtaining property, buildings, la boratory
(3) Increase in intangible assets: Mainly due to MStar Semiconductor, Inc. (Cayman) merger and
(4) Increase in other assets: Mainly due to increase in deferred tax assets.
(5) Increase in total assets: Mainly due to increase in cash and cash equivalents as well as intangible
assets.
(6) Increase in current liability: Mainly due to increase in short-term borrowings, other payables, and tax
liabilities.
(7) Increase in total liabilities: Mainly due to increase in current liabilities.
(8) Increase in additional paid-In capital: Mainly due to new share issuance to obtain the remaining
equity of MStar Semiconductor, Inc. (Cayman)
(9) Increase in retained earnings: Mainly due to increase in net income which is partially offset by 2013
earnings distribution.
(10) Increase in other equity: Mainly due to foreign exchange movement and market price recovery of
financial assets.
(11) Increase in total equity: Mainly due to increase additional paid-In capital, retained earnings, and
MediaTek Inc. | 2014 Annual Report 77
other equity.
2. Operating Results
2.1. Consolidated Report
Unit: NT$ thousands
Item 2013 2014 Change % of Change
Net Sales 136,055,954 213,062,916 77,006,962 56.60
Operating Costs 76,250,370 109,194,295 32,943,925 43.20
Gross Profit 59,805,584 103,868,621 44,063,037 73.68
Operating Expenses 34,561,864 56,627,311 22,065,447 63.84
Operating Income 25,243,720 47,241,310 21,997,590 87.14
Non-Operating Income and
Expenses 4,303,102 5,108,645 805,543 18.72
Net Income before Income Tax 29,546,822 52,349,955 22,803,133 77.18
Income Tax Expense 2,062,172 5,950,882 3,888,710 188.57
Net Income 27,484,650 46,399,073 18,914,423 68.82
Other Comprehensive Income,
net of tax 4,253,825 7,268,758 3,014,933 70.88
Total Comprehensive Income 31,738,475 53,667,831 21,929,356 69.09
Net Income Attributable to
Owners of the Parent 27,515,052 46,397,892 18,882,840 68.63
Total Comprehensive Income
Attributable to Owners of the
Parent
31,760,633 53,627,479 21,866,846 68.85
Explanation for changes that exceed 20% and reached NT$10 million in the past two years:
(1) Increase in net sales: Mainly due to increase in market demand.
(2) Increase in operating costs: Mainly due to increase in operating costs associated with higher sales.
(3) Increase in gross profit and operating income: Mainly due to increasing shipment from higher ASP
products.
(4) Increase in operating expenses: Mainly due to increase in R&D expenses.
(5) Increase in net income before income tax, net income and net income attributable to owners of the
parent: Mainly due to revenue growth.
(6) Increase in income tax expenses: Mainly due to increase in net income.
(7) Increase in other comprehensive income: Mainly due to foreign exchange rate movement.
(8) Increase in total comprehensive income and total comprehensive income attributable to owners of
the parent: Mainly due to increase net income and other comprehensive income.
MediaTek Inc. | 2014 Annual Report 78
2.2. Parent Company
Unit: NT$ thousands
Item 2013 2014 Change % of Change
Net Sales 96,230,064 136,265,018 40,034,954 41.60
Operating Costs 54,894,385 67,990,658 13,096,273 23.86
Gross Profit 41,335,679 68,274,360 26,938,681 65.17
Unrealized (Realized) Gross Profit
on Sales (59,028) 59,028 118,056 N/A
Net Gross Profit 41,276,651 68,333,388 27,056,737 65.55
Operating Expenses 22,464,159 34,466,211 12,002,052 53.43
Operating Income 18,812,492 33,867,177 15,054,685 80.02
Non-Operating Income and
Expenses 10,395,013 16,233,126 5,838,113 56.16
Net Income before Income Tax 29,207,505 50,100,303 20,892,798 71.53
Income Tax Expense 1,692,453 3,702,411 2,009,958 118.76
Net Income 27,515,052 46,397,892 18,882,840 68.63
Other Comprehensive Income,
net of tax 4,245,581 7,229,587 2,984,006 70.28
Total Comprehensive Income 31,760,633 53,627,479 21,866,846 68.85
Explanation for changes that exceed 20% and reached NT$10 million in the past two years:
(1) Increase in net sales: Mainly due to increase in market demand.
(2) Increase in operating costs: Mainly due to increase in operating costs associated with higher sales.
(3) Increase in realized gross profit on sales: Mainly because the intercompany sales last year was sold
to a third party this year.
(4) Increase in gross profit and operating income: Mainly due to increasing shipment from higher ASP
products.
(5) Increase in operating expenses: Mainly due to increase in R&D expenses
(6) Increase in non-operating income and expenses: Mainly due to increase in net income from
investments using equity method.
(7) Increase in net income before income tax and net income: Mainly due to revenue growth.
(8) Increase in income tax expense: Mainly due to revenue growth.
(9) Increase in other comprehensive income: Mainly due to foreign exchange rate movement.
(10) Increase in total comprehensive income: Mainly contributed by revenue growth and increase in
other comprehensive income.
MediaTek Inc. | 2014 Annual Report 79
3. Cash Flow Analysis
3.1. Consolidated Report
Unit: NT$ thousands
Cash
Balance
Dec. 31, 2013
Net Cash Provided by
Operating Activities in
2014
Net Cash Outflows from
Investing and Financing
Activities in 2014
Impact of
Foreign
Exchange Ratio
Cash
Balance
Dec. 31, 2014
Remedy for Cash
Shortfall
(Investment &
Financing Plan)
$132,997,726 $44,329,774 $11,644,983 $3,825,023 $192,797,506 --
3.1.1. Analysis of the Change in Cash Flow in 2014
Operating activities: Net cash inflow of NT$44,329,774 thousand, mainly from operating profits
Investing activities: Net cash inflow of NT$17,801,767 thousand, mainly due to net cash inflows
from the acquisition of MStar (Cayman) Inc. which is partically offset by the purchase of intangible
assets, property, plant and equipment and acquisition of available-for-sale financial assets .
Financing activities: Net cash outflow of NT$6,156,784 thousand, mainly due to the distribution
of earnings which is partially offset by increase in short-term borrowings.
3.1.2. Remedial Actions for Cash Shortfall
The company has ample cash on-hand; remedial actions are not required.
3.1.3. Cash Flow Projection for Next Year
Not applicable.
3.2. Parent Company
Unit: NT$ thousands
Cash Balance
Dec. 31, 2013
Net Cash Provided
by Operating
Activities in 2014
Net Cash Outflows from
Investing and Financing
Activities in 2014
Cash Balance
Dec. 31, 2014
Remedy for
Cash Shortfall
(Investment &
Financing Plan)
$53,710,940 $71,189,319 $2,547,890 $127,448,149 --
3.2.1. Analysis of the Change in Cash Flow in 2014
Operating activities: Net cash inflow of NT$71,189,319 thousand, mainly from operating profits
Investing activities: Net cash inflow of NT$4,581,752 thousand, mainly due to net cash inflows
from the acquisitions of Ralink and MStar (Cayman) Inc. which is partly offset by the purchase of
intangible assets, property, plant and equipment.
Financing activities: Net cash outflow of NT$2,033,862 thousand, mainly due to the distribution
of earnings; partly offset by increase in short-term borrowings.
3.2.2. Remedial Actions for Cash Shortfall
The company has ample cash on-hand; remedial actions are not required.
3.2.3. Cash Flow Projection for Next Year
Not applicable.
MediaTek Inc. | 2014 Annual Report 80
4. Major Capital Expenditure
4.1. Major Capital Expenditure and Sources of Funding
Unit: NT$ thousands
Plan
Actual or
Planned
Source of
Capital
Estimated
Capital
Requirement
(as of Dec 31,
2014)
Status of Actual or Projected Use of Capital
2011 2012 2013 2014
Fixed Assets -
Land, Office
Building and
R&D
Equipment
Cash flow
generated
from
operation
$16,160,954 $2,584,699 $2,268,459 $1,585,174 $9,722,622
Intangible
Assets -
Software, IPs
and Patents
Cash flow
generated
from
operation
$2,493,154 $209,200 $1,163,784 $324,414 $795,756
4.2. Expected Future Benefits
(1) Fixed Assets - Land and office buildings:
Investment in proper and well-planned space is necessary for attracting talents who are responsible for
developing new products. Product development
(2) Fixed Assets - R&D equipment:
the product development cycle.
(3) Intangible assets: software, IPs and patents:
It is necessary for the company to strengthen its patent protection in order to navigate the current
competitive landscape, which is often mired in complex patent disputes. The company has continued its
efforts to obtain high-
5. Investment Policies
-term strategic investments. Investment gain from equity method
investment in 2014 was NT$983,941 thousand. The company will keep its long-term strategic investment
policy and evaluate investment plans prudently.
MediaTek Inc. | 2014 Annual Report 81
6. Risk Management
6.1. Risks Associated with Interest Rate Fluctuation, Foreign Exchange Volatility, and Inflation
Risks associated with foreign currency:
rency from
Company reviews its assets and liabilities denominated in foreign currency and enter into forward
exchange contracts to hedge the exposure from exchange rate fluctuations. The level of hedging
depends on the foreign currency requirements from each operating unit. As the purpose of holding
forward exchange contracts is to hedge exchange rate fluctuation risk, the gain or loss made on the
contracts from the fluctuation in exchange rates are expected to mostly offset gains or losses made on
the hedged item. The foreign currency sensitivity analysis of the possible change in foreign exchange
ry items denominated in foreign
the volatility in the exchange rates for USD. The information of the sensitivity analysis is as follows: When
NTD appreciates or depreciates against USD by 1 cent, the profit for the years ended December 31, 2014
and 2013 decreases or increases by NT$1,790 thousand and NT$1,399 thousand, while equity
decrease/increase by NT$23,766 thousand and NT$18,669 thousand, respectively.
Risks associated with interest rate:
in credit-linked deposits and interest rate-linked deposits are affected by interest rate. The market value
would decrease (even lower than the principal) when the interest rate increases, and vice versa. The
market values of exchange rate-linked deposits are affected by interest rates and changes in the value
and volatility of the underlying. The following sensitivity analysis focuses on interest rate risk and does
not take into account the interdependencies between risk variables. The interest rate sensitivity analysis
is performed on items exposed to interest rate risk as of the end of the reporting period, including
investments and borrowings with variable interest rates. At the reporting date, an increase/decrease of 10
basis points of interest rate in a reporting period could cause the profit for the years ended December 31,
2014 and 2013 to decrease/increase by NT$1,198 thousand and NT$2,570 thousand, respectively.
Risks associated with inflation:
There was no major impact from inflation on the Compan 4 operations.
The Finance Division is responsible for related risk management.
6.2. Risks Associated with High-Risk/High-Leveraged Investment; Lending, Endorsements, and Guarantees for Other Parties; and Financial Derivative Transactions As part o
either high-risk or highly leveraged. The Company has in place a complete and thorough policy and
internal control scheme governing lending, endorsements, guarantees for other parties, and financial
derivative transactions. For lending, endorsements
MediaTek Inc. | 2014 Annual Report 82
and guarantees for other parties are in accordance with relevant provisions. The Company engages in
derivative transactions for hedging purposes. Any gains or losses from such transactions should roughly
cancel out gains or losses in the underlying assets. For the last fiscal year and year to date, all the
transactions are in accordance with relevant provisions.
The Finance Division is responsible for related risk management.
6.3. Future R&D Plans and Expected R&D Spending R&D Project Name Schedule
Next generation 2.75G and 3G Mobile Phone Chipsets
End of 2015 Next generation LTE Smartphone Chipsets
Next generation tablet chips
Next generation highly-integrated wireless communication chips
Next generation wireless charging chips Early 2015
Next generation highly-integrated low power WLAN & WPAN chipsets End of 2015
Nest generation highly-integrated Smart UHDTV Chips End of 2015
Next generation highly-integrated xPON chipsets
Early 2016 Highly-integrated Universal Home Gateway (UHG) chipsets
Next generation gigabyte digital subscriber line (G. fast) chipsets
Next generation automotive chipsets
economical way. R&D expenses in 2013 and 2014 were NT$26,453,942 thousand and NT$43,337,348
thousand, accounting for 19.44% and 20.34% of revenue respectively. The Company will continue to invest
in R&D to develop products for next generation communication standard. The budget for R&D projects
abovementioned accounts for approximately 80% of 2015 total R&D budget which is estimated to be
approximately 20% of 2015 revenue.
6.4. Risk Associated with Changes in the Political and Regulatory Environment
Exchange ("TSE") or traded on the Taiwan GreTai Securities Market or Emerging Stock Market to prepare
their financial statements in accordance with the International Financial Reporting Standards,
International Accounting Standards, and Interpretations developed by the International Financial
the Preparation of Financial Reports by Securities Issuers, starting 2013. The Company has finished
preparation of 2014 interim and annual financial report according to regulations of FSC.
regulatory environment
6.5. Impact of New Technology and Industry Changes Technologies used in the electronics and semiconductor industries are constantly changing. New
standards and applications continuously emerge in wireless communication and digital home segments.
The Company will continue to invest in research and development, to improve operating efficiency, and to
monitor the latest trend of the market, in order to secure and expand our market share.
MediaTek Inc. | 2014 Annual Report 83
changes.
6.6. Changes in CorporManagement MediaTek prides itself on its corporate image. The management has always maintained a humanistic
philosophy toward management. MediaTek provides a working environment that is both challenging and
nurturing for its employees, who are able to grow and realize their full potential. Those are some of the
reasons that MediaTek has been able to attract the top talents in the industry and maintain its leading
position in global IC Design. At the same time, MediaT
respect, integrity, honesty, introspection, life-long learning, creativity, and team-work. As of the Annual
image
6.7. Risks Associated with Mergers and Acquisitions In order to enhanc
issued) under the condition that the price of the deal was 1 MStar share in exchange for 0.794 share of
thousand in cash for the tender offer. In January 2014, MediaTek acquired substantial control of MStar and
fully consolidated MStar. Please refer to section 6 of the annual report for more details.
execution.
6.8. Risks Associated with Facility Expansion
office buildings in Hsinchu Science Park, Jubei Tai-Yuen Hi-Tech Industrial Park, Taipei Neihu Technology
Park and Mainland China. Expansion plans are under prudent assessments and are all office buildings to
ensure they fully meet operation needs such as space for working, labs and the rest. Results of the benefit
The Human Resources Division is responsible for managing the risks associated with plant expansion.
6.9. Risks Associated with Purchase Concentration and Sales Concentration
any of its production lines. Therefore there is no risk associated with purchase concentration. Sales
Japan, Korea, Europe, Southeast Asia, and Greater China.
Each business units are responsible for managing the risks associated with purchase concentration and
sales concentration.
MediaTek Inc. | 2014 Annual Report 84
6.10. Risks Associated with Sales of Significant Numbers of Shares by
Total Outstanding Shares In the latest fiscal year and as of the date of this Annual Report, there were no such risks for MediaTek.
6.11. Risks Associated with Change in Management In the latest fiscal year and as of the date of this Annual Report, there were no such risks for MediaTek.
6.12. Risks Associated with Litigations (1) Azure Networks, LLC ( Azure ) and Tri-County Excelsior Foundation( TCEF ) filed a complaint in the
United States District Court for the Eastern District of Taxes against Ralink and Ralink Technology
Corporation (USA), along with other defendants in March 2011, alleging infringement of United States
Patent No. 7,756,129. On April 6, 2012, Azure and TCEF filed a complaint in the United States District Court
for the Eastern District of Texas against MTK alleging infringement of the same patent referenced above.
On May 30, 2013, the Court entered a judgment in favor of Ralink and other defendants, dismissing the
een filed by plaintiffs on June 20, 2013.
judgment and remanded the case to the district court. The court dismissed the claims against Ralink
pursuant
judgment dismissing the latter case pursuant to the parties' joint stipulation.
Additionally, on January 13, 2015, Azure filed a complaint in the United States District Court for the Eastern
District of Texas against MTK and subsidiary MediaTek USA Inc. alleging infringement of United States
Patent Nos. 7,756,129, 8,582,570, 8,582,571, 8,588,196, 8,588,231, 8,589,599, 8,675,590, 8,683,092 and
wireless communications, tablet and mobile phone chips, and seeking damages. The
operations of MTK and subsidiary MediaTek USA Inc. would not be materially affected by this case.
(2) Commonwealth Scientific and Industrial Research Organization filed a complaint in the United
States District Court for the Eastern District of Texas against MTK and subsidiaries MediaTek USA Inc.,
Ralink, and Ralink Technology Corporation (USA), along with other defendants on August 27, 2012 alleging
infringement of United States Patent No. 5,487,069. The operations of MTK and subsidiary MediaTek USA
Inc. would not be materially affected by this case.
(3) Palmchip Corporation ( Palmchip ) filed a complaint in the Superior Court of California in the County
of Santa Clara against MTK and subsidiaries MediaTek USA Inc., Ralink and Ralink Technology Corporation
(USA) on October 19, 2012, asserting claims of breach of contract. The operations of MTK and subsidiary
MediaTek USA Inc. would not be materially affected by this case.
Palmchip filed a complaint in the United States District Court for the Central District of California against
MTK and subsidiaries MediaTek USA Inc., Ralink, and Ralink Technology Corporation (USA) on August 30,
2013, alleging infringement of United States Patents Nos. 6,601,126, 6,769,046, and 7,124,376. The
operations of MTK and subsidiary MediaTek USA Inc. would not be materially affected by this case.
(4) Optical Devices, LLC ( Optical Devices ) filed a complaint with the U.S. International Trade
Commissio
disc drive chips infringe its patent and sought to prevent the accused products from being imported into
the United States. The Commission issued an Initial Determination on July 17, 2014 finding that Optical
Devices failed to meet the domestic industry requirement and terminating the investigation. On
MediaTek Inc. | 2014 Annual Report 85
September 3, 2014, the Commission vacated the Initial Determination and remanded the case for further
proceedings. On October 21, 2014, the Commission issued an Initial Determination to terminate the
cember 4, 2014, the Commission
partially vacated the Initial Determination and remanded a part of the case including the investigation
against MTK for further proceedings. On April 27, 2015, the Commission issued an Initial Determination
terminate the inve
Also on September 3, 2013, Optical Devices filed a complaint in the United States District Court for the
ptical disc drive
chips infringe the above referenced patent. The operations of MTK and subsidiary MediaTek USA Inc.
would not be materially affected by this case.
(5)Vantage Point Technology, Inc. ( Vantage ) filed a complaint in the United States District Court for
the Eastern District of Texas against MediaTek USA Inc. on November 21, 2013, alleging infringement of
United States Patent Nos. 5,463,750 and 6,374,329. The court dismissed the claims with prejudice against
MediaTe
(6) Bandspeed Inc. filed a complaint in the United States District Court for the Western District of Texas
against MTK, subsidiary MediaTek USA Inc. and other defendants on May 9, 2014, alleging infringement of
United States Patent Nos. 7,027,418, 7,570,614, 7,477,624, 7,903,608 and 8,542,643. On October 17, 2014, the
court granted the parties joint stipulation to dismiss the claims against MTK, all other claims against other
parties including those against subsidiary MediaTek USA Inc. remain pending. On February 13, 2015, the
Patent No. 8,873,500 to the case. The operations of MTK and subsidiary MediaTek USA Inc. would not be
materially affected by this case.
(7) Adaptive Data LLC filed a complaint in the United States District Court for the
District of Delaware against subsidiary MediaTek USA Inc. on December 31, 2014, alleging infringement of
United States Patent Nos. 6,108,347 and 6,243,391 by the Bluetooth chips of subsidiary MediaTek USA Inc.
and seeking damages. This case has been settled and Adaptive Data voluntarily dismissed the case on
February 19, 2015.
(8) Luciano F. Paone filed a complaint in the United States District Court for the South District of New
York against subsidiary MediaTek USA Inc. on February 9, 2015, alleging infringement of United States
Patent No. 6,259,789. The operations of MTK and subsidiary MediaTek USA Inc. would not be materially
affected by this case.
(9) Innovatio IP Ventures, LLC ( Innovatio ) filed a complaint in the United States District Court for the
Northern District of Illinois against subsidiary MediaTek USA Inc. on March 16, 2015, alleging infringement
of United States Patent Nos. 6,697,415, 5,844,893, 5,740,366, 7,916,747, 6,665,536, 7,013,138, 7,107,052,
5,546,397, 7,710,907, 7,710,935, 6,714,559, 7,457,646 and 6,374,311. The operations of MTK and subsidiary
MediaTek USA Inc. would not be materially affected by this case.
The Company will handle these cases carefully.
6.13. Other Material Risk: None.
MediaTek Inc. | 2014 Annual Report 86
7. Other Material Events
7.1. Certificate Holding Status for Personnel Associated with Financial Transparency
Certificate
Headcount
CPA US CPA CICPA CA Singapore CIA CMA
Finance 11 1 - 1 5 1
Internal audit - - 1 - 3 -
MediaTek Inc. | 2014 Annual Report 87
Me
dia
Te
k
Gold Rich International (Saoma)
Limited 100%
Gold Rich International (HK) Limited
100%
MediaTek Investment Singapore Pte. Ltd.
100%
Gaintech Co. Limited
100%
MTK Wireless Limited (UK)
100%
Smarthead Limited
100%
MediaTek Denmark Aps
100%
MediaTek Bangalore Private Limited
100%
Hesine Technologies International Worldwide
Inc. 65%
Hesine Techologies, Inc.
100%
MStar Semiconductor B.V.
100%
White Dwarf Limited
100%
EcoNet (Cayman) Inc.
88%
EcoNet (HK) Limited
100%
Lightup International Corp.
100%
EcoNet (Suzhou) Limited
100%
Lepower Limited
100%
Lepower (HK) Limited
100%
Lepower Technologies (Beijing) Inc.
91%
Ralink Technolgy (Samoa) Corp.
100%
AutoChips (Heifei) Inc.
89%
MediaTek (Suzhou) Inc.
100%
MediaTek Wireless FZ-LLC
100%
Shadow Investment Limited
100%
MediaTek (Nanjing) Inc.
100%
MediaTek USA Inc.
100%
MediaTek Japan Inc.
100%
MediaTek Wireless Finland Oy
100%
MediaTek Singapore Pte. Ltd.
100%
Shunfonger Investment Holding Limited
100%
MediaTek India Technology Pvt. Ltd.
100%
MediaTek (Shanghai) Inc.
100%
T-Rich Technology (Cayman) Corp.
100%
MStar France SAS
100%
MediaTek Korea Inc.
100%
MediaTek Sweden AB
100%
Digimoc Holdings Limited
100%
Bubbly Bay Holdings Limited
100%
MediaTek (Chengdu) Inc.
100%
MStar Semiconductor UK Ltd.
100%
MediaTek Inc. China (Hong Kong)
100%
MediaTek (Beijing) Inc.
100%
MStar Semiconductor Inc.
100%
IStar Technology Ltd.
100%
IStar (HK) Technology Ltd.
100%
MediaTek (Wuhan) Inc.
100%
MStar Co., Ltd.
100%
Mstar Software R&D (Shenzhan), Ltd
100%
MediaTek (Heifei) Inc.
100%
E-Vehicle Semiconductor (Shianghai) Co., Ltd.
100%
Core Tech Resources Inc.
100%
MediaTek India Technology Pvt. Ltd.
0%
Mstar Chen Si Electronics Technology (Shanghai) Co.,Ltd
100%
MediaTek Bangalore Private Limited
0%
MediaTek (ShenZhen) Inc.
100%
E-Vehicle Investment Limited
100%
Hsu-Ta Investment Ltd.
100%
MediaTek Capital Co., Ltd.
100%
RollTech Technology Co. Ltd.
67%
E-vehicle Semiconductor Technology Co. Ltd.
72%
E-Vehicle Holdings Corp.
100%
VIII. Special Disclosure
1. Summary of Affliated Companies
1.1. MediaTek Affiliated Companies Chart
Note: ownership percentage is less than 50% but the Company has a controlling interest.
Dec. 31, 2014
MediaTek Inc. | 2014 Annual Report 88
1.2. MediaTek Affiliated Companies
As of Dec. 31, 2014. Unit: NT$ thousands / Foreign Currency thousands
Company
Name
Date of
Incorporation
Place of
Registration
Capital
Stock
Major
Business
Hsu-Ta
Investment
Ltd.
Sep 2002 Taiwan NTD 10,625,356 Investment
MediaTek
Singapore Pte.
Ltd.
Jun 2004 Singapore SGD 111,994 R&D, manufacturing and sales
MediaTek
Investment
Singapore Pte.
Ltd.
Jan 2008 Singapore USD 2,193,635 Investment
T-Rich
Technology
(Cayman) Corp.
Oct 2009 Cayman Islands USD 1,249 Investment
MStar
Semiconductor
Inc.
Jun 2002 Taiwan NTD 1,452,532 R&D, manufacturing and sales
CoreTech
Resources Inc.
Sep 2002 B.V.I. USD 57,200 Investment
MediaTek
Capital Co.,
Ltd.
Sep 2000 Taiwan NTD 3,600,000 Investment
RollTech
Technology Co.
Ltd.
Mar 2007 Taiwan NTD 52,620 Software development
E-vehicle
Semiconductor
Technology Co.
Ltd.
May 2011 Taiwan NTD 156,000 R&D, manufacturing and Sales
MediaTek Inc.
China (Hong
Kong)
Sep 2007 Hong Kong HKD 2,445,564 Investment
MTK Wireless
Limited (UK)
Aug 2007 UK GBP 65,508 R&D
MediaTek
Japan Inc.
Jun 1997 Japan JPY 100,000 R&D
MediaTek India
Technology
Pvt. Ltd.
May 2004 India INR 55,000 R&D
MediaTek
Korea Inc.
Feb 2007 Korea KRW
2,000,000
R&D
Hesine
Technologies
International
Worldwide Inc.
Oct 2010 B.V.I. USD 218 Investment
Gold Rich
International
(Samoa)
Limited
Mar 2011 Samoa USD 4,290 Investment
MediaTek Inc. | 2014 Annual Report 89
Company
Name
Date of
Incorporation
Place of
Registration
Capital
Stock
Major
Business
Smarthead
Limited
Jan 2011 Seychelles USD 700 Investment
Lepower
Limited
Mar 2011 Samoa USD 2,895 Investment
Ralink
Technology
(Samoa) Corp.
Mar 2008 Samoa USD 7,150 Investment
EcoNet
(Cayman) Inc.
Mar 2013 Cayman Islands USD 16,413 Investment
Mediatek
Wireless FZ-
LLC
Nov 2013 Dubai AED 50 Customer support & service
MediaTek
(Heifei) Inc.
Aug 2003 Mainland China USD 17,000 R&D
MediaTek
(Beijing) Inc.
Oct 2006 Mainland China USD 100,000 R&D
MediaTek
(Shenzhen) Inc.
Oct 2003 Mainland China USD 90,000 R&D and Customer support &
service
MediaTek
(Chengdu) Inc.
Sep 2010 Mainland China USD 49,800 R&D
MediaTek
(Wuhan) Inc.
Dec 2010 Mainland China USD 4,800 R&D
MediaTek
(Shanghai) Inc.
Jan 2011 Mainland China USD 3,000 R&D
Mstar Chen Si
Electronics
Technology
(Shanghai)
Co.,Ltd
Dec 2009 Mainland China CNY297,000 R&D and Customer support &
service
MediaTek
Sweden AB
Dec 2004 Sweden SEK 1,008 R&D
MediaTek USA
Inc.
May 1997 USA USD 0.1 R&D
MediaTek
Denmark Aps
Oct 2007 Denmark DKK 20,000 R&D
MediaTek
Wireless
Finland Oy
Oct 2014 Finland EUR 3 R&D
Hesine
Techologies,
Inc.
Sep 2008 Mainland China CNY 10,000 Customer support & service
Gold Rich
International
(HK) Limited
Mar 2011 Hong Kong USD 4,190 Investment
Lepower (HK)
Limited
Mar 2011 Hong Kong USD 3,050 Investment
Lepower
Technologies
(Beijing) Inc.
Dec 2011 Mainland China USD 3,300 R&D, manufacturing and sales
E-Vehicle
Holdings Corp.
Aug 2011 Samoa USD 1,600 Investment
MediaTek Inc. | 2014 Annual Report 90
Company
Name
Date of
Incorporation
Place of
Registration
Capital
Stock
Major
Business
E-Vehicle
Investment
Limited
Sep 2012 Hong Kong USD 1,600 Investment
E-Vehicle
Semiconductor
(Shianghai) Co.,
Ltd.
May 2012 Mainland China USD 1,600 R&D, manufacturing and sales
Shadow
Investment
Limited
Apr 2002 Samoa USD 15,000 Investment
EcoNet (HK)
Ltd.Limited
Mar 2013 Hong Kong USD 54,535 R&D, manufacturing and sales
EcoNet
(Suzhou)
Limited
Apr 2014 Mainland China USD 5,000 R&D, manufacturing and sales
MediaTek
(Suzhou) Inc.
Oct 2003 Mainland China USD 1,500 R&D
MediaTek
(Nanjing) Inc.
Jun 2008 Mainland China USD 1,000 R&D
AutoChips
(Heifei) Inc.
Nov 2013 Mainland China USD 5,500 R&D, manufacturing and sales
MSar
Semiconductor
B.V.
Feb 2008 Holland EUR 1,197 Investment
Lightup
International
Corp.
Feb 2009 Taiwan NTD 8,000 Investment
MediaTek
Bangalore
Private Limited
May 2014 India INR 20,000 R&D
Gaintech Co.
Limited
July 2000 Cayman Islands USD 326,291 Investment
White Dwarf
Limited
July 2007 B.V.I. USD 5 Investment
MStar France
SAS
Oct 2006 France EUR 4,589 Software Development
Shunfonger
Investment
Holding
Limited
Apr 2010 B.V.I. USD 735 Investment
IStar
Technology
Ltd.
Aug 2013 Cayman Islands USD 50 Investment and sales
MStar Co., Ltd. May 2003 Brunei USD 5,850 Investment
Digimoc
Holdings
Limited
Sep 2007 B.V.I. USD 50 Investment
MStar
Semiconductor
UK Ltd.
Jun 2007 UK GBP 915 Software and customer
development
MediaTek Inc. | 2014 Annual Report 91
Company
Name
Date of
Incorporation
Place of
Registration
Capital
Stock
Major
Business
IStar (HK)
Technology
Ltd.
Sep 2013 Hong Kong USD 10 Investment and sales
Mstar
Software R&D
(Shenzhan),
Ltd
Aug 2003 Mainland China USD 30,000 Software and customer
development
Bubbly Bay
Holdings
Limited
Jan 2006 B.V.I. USD 50 Investment
1.3. Common Shareholders of MediaTek and Its Subsidiaries or Its Affiliates with Actual of Deemed Control None
1.4. Business Scope of MediaTek and Its Affiliated Companies Business scope of MediaTek and its affiliates include the investment, R&D, promotion, after-
sale service for optical storage products, digital consumer products, wireless communication,
digital TV, networking and, etc. MediaTek
acquiring leading technology through investments.
MediaTek Inc. | 2014 Annual Report 92
1.5. Affiliated Companies
December 31, 2014 (Unit: share / %)
Company Name Title Name or
Representative
Shares % of
Holding
Hsu-Ta Investment Ltd. Chairman/Director MediaTek Inc.
Rep.: Ching-Jiang Hsieh
1,062,535,590 100%
Director MediaTek Inc.
Rep.: David Ku
Director MediaTek Inc.
Rep.: Jane Chen
Supervisor MediaTek Inc.
Rep.: Kirin Liu
MediaTek Singapore Pte. Ltd. Director MediaTek Inc,
Rep.: CC Ku 111,993,960 100%
Director MediaTek Inc.
Rep.: David Ku
MediaTek Investment
Singapore Pte. Ltd.
Director MediaTek Inc,
Rep.: CC Ku 2,193,635,278 100%
Director MediaTek Inc.
Rep.: David Ku
T-Rich Technology (Cayman)
Corp.
Director MediaTek Inc.
Rep.: Jane Chen
1,248,583 100%
MStar Semiconductor Inc. Chairman/ Director Gon-Wei Liang - -
Director Han-Fei Lin - -
Director Chin-Men Kao - -
Director Wen-Nan Tsan - -
Director Chern-Lin Chen - -
Supervisor Hsing-Ning Yu - -
CoreTech Resources Inc. Director Hsu-Ta Investment Ltd.
Rep.: David Ku 57,200,000 100%
MediaTek Capital Co., Ltd. Chairman/Director Hsu-Ta Investment Ltd.
Rep.: Ching-Jiang Hsieh
360,000,000 100%
Director Hsu-Ta Investment Ltd.
Rep.: David Ku
Director Hsu-Ta Investment Ltd.
Rep.: Jane Chen
Supervisor Hsu-Ta Investment Ltd.
Rep.: Kirin Liu
RollTech Technology Co. Ltd. Chairman/ Director MediaTek Capital Co.
Rep: Hui-Ling Liu 3,510,000 67%
Director MediaTek Capital Co.
Rep.: YuChuan Yang 3,510,000 67%
Director Trinity investment
Corporation 701,000 13%
Supervisor MediaTek Capital Co.
Rep: Shouyen Liu 3,510,000 67%
MediaTek Inc. | 2014 Annual Report 93
Company Name Title Name or
Representative
Shares % of
Holding
E-vehicle Semiconductor
Technology Co. Ltd.
Chairman/ Director MediaTek Capital Co.
Rep: JC Hsu
11,200,000 72% Director MediaTek Capital Co.
Rep: Jane Chen
Director Chao-Ting Ho 1,536,000 10%
Supervisor Shouyen Liu - -
MediaTek Inc. China (Hong
Kong)
Director Gaintech Co. Limited
Rep.: David Ku 2,445,564,020 100%
MTK Wireless Limited (UK) Director Gaintech Co. Limited
Rep.: David Ku 65,508,146 100%
MediaTek Japan Inc. Chairman/Director Gaintech Co. Limited
Rep.: David Ku
7,100 100%
Director Gaintech Co. Limited
Rep.: Jeffrey Ju
Director Gaintech Co. Limited
Rep.: Yoshitaka Sakurai
Supervisor Gaintech Co. Limited
Rep.: Kirin Liu
MediaTek India Technology Pvt.
Ltd.
Director Gaintech Co. Limited
Rep.: Grant Kuo
5,499,999 100% Director Gaintech Co. Limited
Rep.: David Ku
Director Gaintech Co. Limited
Rep.: Jane Chen
MediaTek Korea Inc. Director Gaintech Co. Limited
Rep.: Jerry Yu
200,000 100%
Director Gaintech Co. Limited
Rep.: John Lee
Director Gaintech Co. Limited
Rep.: David Ku
Supervisor Gaintech Co. Limited
Rep.: Kirin Liu
Hesine Technologies
International
Worldwide Inc.
Director Gaintech Co. Limited
Rep.: David Ku
566,667 65% Director Gaintech Co. Limited
Rep.: Shouyen Liu
Director NQ Mobile Inc.
Rep.: Yu Lin 306,944 35%
Gold Rich International (Samoa)
Limited
Director Gaintech Co. Limited
Rep.: Jane Chen 4,290,000 100%
MediaTek Inc. | 2014 Annual Report 94
Company Name Title Name or
Representative
Shares % of
Holding
Smarthead Limited Director Gaintech Co. Limited
Rep.: Jane Chen 700,000 100%
Lepower Limited Director Gaintech Co. Limited
Rep.: Jane Chen 2,888,481 100%
Ralink Technology (Samoa)
Corp.
Director Gaintech Co. Limited
Rep.: David Ku 7,150,000 100%
EcoNet (Cayman) Inc. Director Gaintech Co. Limited
Rep.: David Ku 14,382,660 88%
Director Gaintech Co. Limited
Rep.: Jerry Yu 14,382,660 88%
Director Gaintech Co. Limited
Rep.: Bomin Wang 14,382,660 88%
Director PVG GCN Ventures, L.P
Rep.: Pang-Yen Yang 2,030,346 12%
MediaTek Wireless FZ-LLC Director Gaintech Co. Limited
Rep.: CC Ku
50
100%
Director Gaintech Co. Limited
Rep.: David Ku
Director Gaintech Co. Limited
Rep.: Jane Chen
MediaTek (Heifei) Inc. Executive director /
Legal
representative
MediaTek Inc. China
(Hong Kong)
Rep.: Wang Hai Not applicable 100%
Supervisor MediaTek Inc. China
(Hong Kong)
Rep.: Kirin Liu
MediaTek (Beijing) Inc. Executive director /
Legal
representative
MediaTek Inc. China
(Hong Kong)
Rep.: Wang Hai Not applicable 100%
Supervisor MediaTek Inc. China
(Hong Kong)
Rep.: Kirin Liu
MediaTek (ShenZhen) Inc. Executive director /
Legal
representative
MediaTek Inc. China
(Hong Kong)
Rep.: Wang Hai Not applicable 100%
Supervisor MediaTek Inc. China
(Hong Kong)
Rep.: Kirin Liu
MediaTek (Chengdu) Inc. Executive director /
Legal
representative
MediaTek Inc. China
(Hong Kong)
Rep.: Wang Hai Not applicable 100%
Supervisor MediaTek Inc. China
(Hong Kong)
Rep.: Kirin Liu
MediaTek (Wuhan) Inc. Executive director /
Legal
representative
MediaTek Inc. China
(Hong Kong)
Rep.: Wang Hai
Not applicable 100%
MediaTek Inc. | 2014 Annual Report 95
Company Name Title Name or
Representative
Shares % of
Holding
Supervisor MediaTek Inc. China
(Hong Kong)
Rep.: Kirin Liu
MediaTek (Shanghai) Inc. Executive director /
Legal
representative
MediaTek Inc. China
(Hong Kong)
Rep.: Wang Hai Not applicable 100%
Supervisor MediaTek Inc. China
(Hong Kong)
Rep.: Kirin Liu
Mstar Chen Si Electronics
Technology (Shanghai) Co., Ltd
Executive director /
Legal
representative
MediaTek Inc. China
(Hong Kong)
Rep.: Wang Hai Not applicable 100%
Supervisor MediaTek Inc. China
(Hong Kong)
Rep.: Kirin Liu
MediaTek Sweden AB Director MTK Wireless Limited
(UK)
Rep.: David Ku 1,008,371 100%
Director MTK Wireless Limited
(UK)
Rep.: Johan Erik Lodenius
MediaTek USA Inc.
Director
MTK Wireless Limited
(UK)
Rep.: David Ku 111,815 100%
Director
MTK Wireless Limited
(UK)
Rep.: Kevin Jou
MediaTek Denmark Aps Director MTK Wireless Limited
(UK)
Rep.: David Ku
20,000,000 100%
MediaTek Wireless Finland Oy Director MTK Wireless Limited
(UK)
Rep.: Jane Chen
1,000 100% Director
MTK Wireless Limited
(UK)
Rep.: Jeanette Padgett
Director MTK Wireless Limited
(UK)
Rep.: Gemma Noonan
Hesine Technologies, Inc. Legal
representative
Hesine Technologies
International Worldwide
Inc.
Rep.: Yu Lin
Not applicable 100%
Gold Rich International (HK)
Limited
Director Gold Rich International
(Samoa) Limited
Rep.: Jane Chen 4,190,000 100%
Director Gold Rich International
(Samoa) Limited
Rep.: C.C. Yeh
MediaTek Inc. | 2014 Annual Report 96
Company Name Title Name or
Representative
Shares % of
Holding
Lepower (HK) Limited Director Lepower Limited
Rep.: Jane Chen 3,050,000 100%
Lepower Technologies (Beijing)
Inc.
Chairman/Director Lepower (HK) Limited
Rep: Aaron Chang Not applicable 91%
Director
Zhongguancun
Development Group
Rep: Jun-Yao Shen Not applicable 9%
Director Lepower (HK) Limited
Rep: Phillips Lu
Not applicable 91% Supervisor Lepower (HK) Limited
Rep: Kirin Liu
E-Vehicle Holdings Corp. Director E-Vehicle
Semiconductor
Technology Co. Ltd.
Rep: Jane Chen
1,600,000 100%
E-Vehicle Investment Limited Director E-Vehicle Holdings Corp.
Rep: Jane Chen 1,600,000 100%
E-Vehicle Semiconductor
(Shianghai)
Co., Ltd.
Chairman/Director E-Vehicle Investment
Limited
Rep: Chao-Ting Ho
Not applicable 100%
Director E-Vehicle Investment
Limited
Rep: Amy Chung
Director E-Vehicle Investment
Limited
Rep: Shouyen Liu
Supervisor E-Vehicle Investment
Limited
Rep: Wen-Lung Hsu
Shadow Investment Limited Director EcoNet (Cayman) Limited
Rep.: Hsu-Feng Ho 15,000,000 100%
EcoNet(HK) Limited Director EcoNet (Cayman) Inc.
Rep: Jane Chen 54,534,520 100%
EcoNet (Suzhou) Limited Director/ Legal
representative
EcoNet (HK) Limited
Rep.: Hsu-Feng Ho
Not applicable 100% Director EcoNet (HK) Limited
Rep.: Jhe-Wei Lin
MediaTek (Suzhou) Director/ Legal
representative
Shadow Investment
Limited
Rep.: Jerry Yu
Not applicable 100%
Director Shadow Investment
Limited
Rep.: David Ku
Director Shadow Investment
Limited
Rep.: Bomin Wang
MediaTek Inc. | 2014 Annual Report 97
Company Name Title Name or
Representative
Shares % of
Holding
Supervisor Shadow Investment
Limited
Rep.: Kirin Liu
MediaTek (Nanjing) Director/ Legal
representative
Shadow Investment
Limited
Rep.: Bomin Wang
Not applicable 100%
Director Shadow Investment
Limited
Rep.: David Ku
Director Shadow Investment
Limited
Rep.: Victor Liu
Supervisor Shadow Investment
Limited
Rep.: Kirin Liu
AutoChips (Heifei) Inc.
Director Ralink Technology
(Samoa) Corp.
Rep.:Ping-Hsing Lu
Not applicable 89%
Director Ralink Technology
(Samoa) Corp.
Rep.:David Ku
Director Ralink Technology
(Samoa) Corp.
Rep.:Wen Hsin Wang
MSar Semiconductor B.V.
Director MediaTek Investment
Singapore Pte. Ltd.
Rep.:Jeanette Padgett 11,972 100%
Director MediaTek Investment
Singapore Pte. Ltd.
Rep.: Jongsma Eleonora
Lightup International Corp. Chairman MStar Semiconductor
B.V.
Rep.: Ching-Jiang Hsieh
800,000 100%
Director MStar Semiconductor
B.V.
Rep.: David Ku
Director MStar Semiconductor
B.V.
Rep.: Jane Chen
Supervisor MStar Semiconductor
B.V.
Rep.: Kirin Liu
MediaTek Bangalore Private
Limited
Director MediaTek Investment
Singapore Pte. Ltd
Rep.: Grant Kuo
1,999,999 100%
Director MediaTek Investment
Singapore Pte. Ltd
Rep.: David Ku
Director MediaTek Investment
Singapore Pte. Ltd
Rep.:Anku Jain
MediaTek Inc. | 2014 Annual Report 98
Company Name Title Name or
Representative
Shares % of
Holding
Gaintech Co. Limited Director
MediaTek Investment
Singapore Pte. Ltd.
Rep.: David Ku
326,291,153 100%
White Dwarf Limited
Director
MStar Semiconductor
B.V.
Rep: David Ku
5,000 100%
MStar France SAS
Director
MStar Semiconductor
Inc.
Rep.: Gon-Wei Liang
458,900 100%
Shunfonger Investment
Holding Limited Director
MStar Semiconductor
Inc.
Rep.: Gon-Wei Liang
735,300 100%
IStar Technology Ltd.
Director
MStar Semiconductor
Inc.
Rep.: Han-Fei Lin
50,000 100%
MStar Co., Ltd.
Director
MStar Semiconductor
Inc.
Rep.: Gon-Wei Liang
5,850,000 100%
Digimoc Holdings Limited
Director
MStar Semiconductor
Inc.
Rep.: Gon-Wei Liang
50,000 100%
MStar Semiconductor UK Ltd.
Director
MStar Semiconductor
Inc.
Rep.: Gon-Wei Liang
915,000 100%
IStar (HK) Technology Ltd. Director
IStar Technology Ltd.
Rep.: Han-Fei Lin 10,000 100%
Mstar Software R&D
(Shenzhan), Ltd Chairman MStar Co., Ltd
Rep.: Chin-Men Kao Not Applicable 100%
Director MStar Co., Ltd
Rep.: Miao-Tzu Tu Not Applicable 100%
Director MStar Co., Ltd
Rep.: Li-Chiu Mao Not Applicable 100%
Bubbly Bay Holdings Limited
Director
Digimoc Holdings
Limited
Rep.: Gon-Wei Liang
50,000 100%
MediaTek Inc. | 2014 Annual Report 99
1.6. Operation Highlights of MediaTek Affiliated Companies
Dec. 31, 2014, Unit: NT$ thousands
Company
Name Capital Assets Liabilities
Net
Worth
Net
Sales
Income
(loss) from
Operation
Net
Income
EPS
(NT$)
Hsu-Ta
Investment
Ltd. 10,625,356 11,181,029 - 11,181,029 257,012 248,547 248,547 0.23
MediaTek
Singapore Pte.
Ltd.. 2,473,452 16,292,46
9 6,138,321 10,154,148 35,305,04
9 4,242,662 4,328,214 38.65
MediaTek
Investment
Singapore Pte.
Ltd.
69,577,724
62,917,245 11,388
62,905,857 6,879,481 6,933,117 6,933,117 3. 16
T-Rich
Technology
(Cayman) Corp. 19,801 42,390 - 42,390 4 (242) (242) (0.19)
MStar
Semiconductor
Inc. 1,452,532 28,927,62
5 14,034,876 14,892,74
9 38,489,50
2 8,372,648 5,329,685 36.69
Core Tech
Resources Inc. 1,814,270 3,786,009 613,781 3,172,228 41,079 37,874 37,874 0.66
MediaTek
Capital Co., Ltd. 3,600,000 7,590,218 1 7,590,217 219,337 183,746 184,832 0.51
RollTech
Technology Co.
Ltd. 52,620 45,238 5,192 40,046 28,125 (3,107) (714) (0.14)
E-vehicle
Semiconductor
Technology Co.
Ltd. 156,000 60,289 28,624 31,665 1,993 (38,380) (37,736) (2.42)
MediaTek Inc.
China (Hong
Kong) 9,993,708 19,633,582 6,961,808 12,671,774 457,954 383,994 383,994 0.16
MTK Wireless
Limited (UK) 3,368,717 3,732,580 83,408 3,649,172 687,565 44,975 2,271 0.03
MediaTek
Japan Inc. 26,480 83,095 27,591 55,504 112,379 7,352 1,776 250.14
MediaTek India
Technology
Pvt. Ltd. 27,671 368,513 105,037 263,476 376,813 62,098 44,927 8.17
MediaTek
Korea Inc. 57,714 228,545 105,056 123,489 302,314 19,778 10,340 51.70
Hesine
Technologies
International
Worldwide Inc. 6,927 94,902 16,593 78,309 174 30 30 0.03
Gold Rich
International
(Samoa)
Limited 136,070 1,209,495 - 1,209,495 372,061 372,034 372,034 86.72
Smarthead
Limited 22,203 29,765 - 29,765 9,816 9,793 9,793 13.99
Lepower
Limited 91,825 47,656 (476) 48,132 (7,740) (7,789) (7,789) (2.70)
Ralink
Technology
(Samoa) Corp. 226,784 978,034 32 978,002 699,957 699,483 699,483 97.83
MediaTek Inc. | 2014 Annual Report 100
Company
Name Capital Assets Liabilities
Net
Worth
Net
Sales
Income
(loss) from
Operation
Net
Income
EPS
(NT$)
EcoNet
(Cayman) Inc. 520,588 2,308,624 - 2,308,624 76,308 76,308 76,308 4.65
Mediatek
Wireless FZ-
LLC 432 3,824 3,193 631 14,097 618 618 12,360.00
MediaTek
(Heifei) Inc. 573,208 1,009,816 65,470 944,346 1,003,267 74,194 80,306 Not
Applicable MediaTek
(Beijing) Inc. 3,499,659 4,767,127 306,585 4,460,542 1,531,717 96,627 166,829 Not
Applicable MediaTek
(ShenZhen) Inc. 2,869,539 6,046,803 2,755,812 3,290,991 1,739,624 108,755 92,501 Not
Applicable MediaTek
(Chengdu) Inc. 1,627,643 2,047,480 241,483 1,805,997 779,019 56,547 85,608 Not
Applicable MediaTek
(Wuhan) Inc. 162,583 254,441 (6,231) 260,672 260,792 19,283 47,119 Not
Applicable MediaTek
(Shanghai) Inc. 100,755 72,573 214 72,359 29,887 (8,025) (9,122) Not
Applicable
Mstar Chen Si
Electronics
Technology
(Shanghai) Co.,
Ltd 1,518,415 1,966,911 572,370 1,394,541 853,204 61,334 58,841 Not
Applicable
MediaTek
Sweden AB 4,097 128,856 66,759 62,097 276,755 18,105 20,870 20.70
MediaTek USA
Inc. 4 2,834,943 766,806 2,068,137 3,392,692 221,952 136,877 1,224.14
MediaTek
Denmark Aps 103,054 183,619 22,708 160,911 91,975 6,017 (2,948) (0.15)
MediaTek
Wireless
Finland Oy 100 71,829 27,992 43,837 - (89,093) (89,093) (89,093.00
)
Hesine
Techologies,
Inc. 51,125 28,703 179,650 (150,947) 909 (87,754) (87,754) Not
Applicable
Gold Rich
International
(HK) Limited 132,898 1,206,627 - 1,206,627 381,631 381,585 372,061 88.80
Lepower (HK)
Limited 96,740 46,715 - 46,715 (7,694) (7,740) (7,740) (2.54)
Lepower
Technologies
(Beijing) Inc. 105,828 49,947 41 49,906 2,982 (8,389) (8,389) Not
Applicable
E-Vehicle
Holdings Corp. 50,749 6,874 - 6,874 1,142 (16,914) (16,914) (10.57)
E-Vehicle
Investment
Limited 50,749 6,874 - 6,874 1,142 (16,914) (16,914) (10.57)
E-Vehicle
Semiconductor
(Shianghai) Co.,
Ltd. 51,168 20,051 12,574 7,477 1,148 (16,914) (16,914) Not
Applicable
Shadow
Investment
Limited 475,770 82,288 - 82,288 25,236 (24,825) (24,825) (1.66)
EcoNet (HK)
Ltd. Limited 1,729,726 1,867,719 53,921 1,813,798 127,236 (51,388) (51,388) (0.94)
EcoNet
(Suzhou)
Limited 157,580 804,400 677,390 127,010 280,938 (24,175) (29,658) Not
Applicable
MediaTek Inc. | 2014 Annual Report 101
Company
Name Capital Assets Liabilities
Net
Worth
Net
Sales
Income
(loss) from
Operation
Net
Income
EPS
(NT$)
MediaTek
(Suzhou) Inc. 62,430 34,730 - 34,730 52,052 8,091 10,366 Not
Applicable MediaTek
(Nanjing) Inc. 34,908 36,064 201 35,863 37,775 14,470 14,825
Not Applicable
AutoChips
(Heifei) Inc. 191,912 1,625,835 563,421 1,062,414 2,432,582 915,313 725,944
Not Applicable
MSar
Semiconductor
B.V. 53,314 22,321 - 22,321 3,953,724 3,950,148 3,950,148 329,948.88
Lightup
International
Corp. 8,000 297,205 497,087 (199,882) - (28,865) 6,085 7.61
MediaTek
Bangalore
Private Limited 10,062 177,240 157,915 19,325 68,179 10,713 9,163 4.58
Gaintech Co.
Limited 10,349,303 66,558,154 4,415,673 62,142,481 3,721,165 3,299,164 3,299,164 10.11
White Dwarf
Limited 159 5,592 - 5,592 14 (175) (175) (35.00)
MStar France
SAS 219,213 899,976 60,734 839,242 203,498 39,011 51,644 112.54
Shunfonger
Investment
Holding
Limited 23,322 169 - 169 2,473 2,473 2,473 3.36
IStar
Technology
Ltd. 1,586 166,331 - 166,331 6,635 (2,741) (2,755) (55.10)
MStar Co., Ltd.
185,550 292,684 590,601 (297,917) (37,973) (1,265,875) (1,265,875) (216.39)
Digimoc
Holdings
Limited 1,586 11,267 76,617 (65,350) 123,203 (750,850) (750,850) (15,017.00)
MStar
Semiconductor
UK Ltd. 57,477 152,013 4,843 147,170 91,035 12,148 13,947 15.24
IStar (UK)
Technology
Ltd. 317 317 - 317 - - - -
Mstar Software
R&D
(Shenzhan), Ltd 951,540 360,656 106,286 254,370 552,994 (99,214) (38,534)
Not Applicable
Bubbly Bay
Holdings
Limited 1,586 3,029 - 3,029 17,485 17,466 17,466 349.32
Note: The amount of capital, asset, liabilities and net worth in this table were calculated using the exchange rate at end of 2014. The
net sales, income from operation, net income and EPS numbers were calculated using the average exchange rate in 2014.
2. Private Placement Securities
None
MediaTek Inc. | 2014 Annual Report 102
3. Holding or Disposition of MediaTek Stocks by
Subsidiaries
Unit: NT$ thousands / share / %
Subsidiary Paid-in
Capital
Source
of
Funding
MediaTek
Ownership
Transaction
Date
Number
of
shares
acquired
and its
amount
Number
of shares
Disposed
and its
amount
Investment
gain / loss
Balance
(share &
amount)
Balance
of
Pledged
Shares
Balance of
Guarantee
Provided
by
MediaTek
Balance
of
Financing
Provided
by
MediaTek
MediaTek
Capital Co.
3,600,000 None 100% - - - - 7,794,085
shares;
NT$55,970
thousand
- - -
4. Any Events that Had Significant Impacts on
Item 2 Paragraph 2 of Article 36 of Securities and
Exchange Law of Taiwan
None
5. Other Necessary Supplement
None
MediaTek Inc. | 2014 Annual Report 103
IX. Financial Information
1. Condensed Balance Sheets
1.1. 2012-2014 Consolidated Condensed Balance Sheets MediaTek & Subsidiaries Based on IFRS
Unit: NT$ thousands
Item 2012 2013 2014
Current assets 117,744,362 161,740,929 248,554,935
Funds and investments 64,965,683 68,039,686 15,000,614
Property, plant and equipment 10,732,494 11,312,107 23,294,555
Intangible assets 15,727,448 15,509,193 60,757,826
Other assets 1,236,531 2,034,947 3,510,741
Total assets 210,406,518 258,636,862 351,118,671
Current liabilities Before distribution 32,979,368 61,384,592 101,619,838
After distribution 33,654,058 86,949,915 (note)
Non-current liabilities 1,969,426 1,898,871 1,893,086
Total liabilities Before distribution 34,948,794 63,283,463 103,512,924
After distribution 35,623,484 86,848,786 (note)
Equity attributable to owners of the parent
Share capital 13,493,804 13,497,140 15,714,922
Capital surplus 79,672,498 68,474,910 88,047,914
Retained earnings Before distribution 87,496,557 114,294,875 136,855,169
After distribution 86,821,867 90,729,552 (note)
Other equity (5,183,374) (895,749) 6,606,113
Treasury shares (55,970) (55,970) (55,970)
Total equity attributable to the
parent
Before distribution 175,423,515 195,315,206 247,168,148
After distribution 174,748,825 171,749,883 (note)
Non-controlling interests 34,209 38,193 437,599
Total equity Before distribution 175,457,724 195,353,399 247,605,747
After distribution 174,783,034 171,788,076 (note)
Note:
MediaTek Inc. | 2014 Annual Report 104
1.2. 2010-2011 Consolidated Condensed Balance Sheets MediaTek & Subsidiaries Based on ROC GAAP
Unit: NT$ thousands
Item 2010 2011
Current assets 112,595,354 112,042,128
Funds and investments 7,734,457 9,416,963
Fixed assets 7,807,817 9,810,051
Intangible assets 9,572,335 16,150,659
Other assets 324,729 321,307
Total assets 138,034,692 147,741,108
Current liabilities Before distribution 25,786,256 30,428,120
After distribution 47,785,713 40,756,244
Long-term liabilities - 147,662
Other liabilities 535,101 836,999
Total liabilities Before distribution 26,321,357 31,412,781
After distribution 48,320,814 41,740,905
Capital 10,999,682 11,475,191
Capital reserve 12,259,404 24,605,882
Retained earnings Before distribution 92,708,116 82,463,225
After distribution 70,708,659 72,135,101
Cumulative translation adjustments (4,380,730) (2,253,504)
Net loss not recognized as pension cost - -
Unrealized gain (loss) from financial instruments 182,608 43,192
Treasury stock (55,970) (55,970)
Minority Interests 225 50,311
Before distribution 111,713,335 116,328,327
After distribution 89,713,878 106,000,203
Note: Pending on approval of
1.3. 2012-2014 Condensed Balance Sheets Parent Company Based on IFRS
Unit: NT$ thousands
Item 2012 2013 2014
Current assets 48,948,759 70,707,646 149,267,002
Funds and investments 135,159,040 144,972,800 129,656,160
Property, plant and equipment 6,282,152 6,331,668 9,177,068
Intangible assets 7,039,987 7,242,842 28,740,924
Other assets 579,683 1,216,985 2,429,791
Total assets 198,009,621 230,471,941 319,270,945
Current liabilities Before distribution 20,823,735 33,630,662 70,428,396
After distribution 21,498,425 57,195,985 (note)
Non-current liabilities 1,762,371 1,526,073 1,674,401
Total liabilities Before distribution 22,586,106 35,156,735 72,102,797
After distribution 23,260,796 58,722,058 (note)
Share capital 13,493,804 13,497,140 15,714,922
Capital surplus 79,672,498 68,474,910 88,047,914
Retained earnings Before distribution 87,496,557 114,294,875 136,855,169
After distribution 86,821,867 90,729,552 (note)
Other equity (5,183,374) (895,749) 6,606,113
Treasury shares (55,970) (55,970) (55,970)
Total equity Before distribution 175,423,515 195,315,206 247,168,148
After distribution 174,748,825 171,749,883 (note)
Note: Pending on approval of shareholders at Annual
MediaTek Inc. | 2014 Annual Report 105
1.4. 2010-2011 Condensed Balance Sheets Parent Company Based on ROC GAAP
Unit: NT$ thousands
Item 2010 2011
Current assets 59,573,161 42,508,698
Funds and investments 59,535,407 81,168,558
Fixed assets 6,744,246 6,503,119
Intangible assets 8,623,090 7,714,627
Other assets 164,577 141,602
Total assets 134,640,481 138,036,604
Current liabilities Before distribution 22,159,301 20,740,542
After distribution 44,158,758 31,068,666
Long-term liabilities - -
Other liabilities 768,070 1,018,046
Total liabilities Before distribution 22,927,371 21,758,588
After distribution 44,926,828 32,086,712
Capital 10,999,682 11,475,191
Capital reserve 12,259,404 24,605,882
Retained earnings Before distribution 92,708,116 82,463,225
After distribution 70,708,659 72,135,101
Cumulative translation adjustments (4,380,730) (2,253,504)
Net loss not recognized as pension cost - -
Unrealized gain (loss) from financial instruments 182,608 43,192
Treasury stock (55,970) (55,970)
Before distribution 111,713,110 116,278,016
After distribution 89,713,653 105,949,892
MediaTek Inc. | 2014 Annual Report 106
2. Condensed Statements of Comprehensive
Income / Statements of Income
2.1. 2012-2014 Consolidated Condensed Statements of Comprehensive Income MediaTek & Subsidiaries Based on IFRS
Unit: NT$ thousands Item 2012 2013 2014
Net sales 99,263,160 136,055,954 213,062,916
Gross profit 41,059,021 59,805,584 103,868,621
Operating income 12,402,775 25,243,720 47,241,310
Non-operating income and expenses 4,082,306 4,303,102 5,108,645
Net income before income tax 16,485,081 29,546,822 52,349,955
Net income 15,544,530 27,484,650 46,399,073
Other comprehensive Income, net of tax (3,035,326) 4,253,825 7,268,758
Total comprehensive income 12,509,204 31,738,475 53,667,831
Net income (loss) for the periods attributable to:
Owners of the parent 15,583,745 27,515,052 46,397,892
Non-controlling interests (39,215) (30,402) 1,181
Total comprehensive income for the periods attributable to:
Owners of the parent 12,525,306 31,760,633 53,627,479
Non-controlling interests (16,102) (22,158) 40,352
Earnings per share (NT$) 12.81 20.51 30.04
Earnings per share adjusted (NT$) 12.81 20.51 (note)
2.2. 2010-2011 Consolidated Condensed Statements of Income MediaTek & Subsidiaries Based on ROC GAAP
Unit: NT$ thousands Item 2010 2011
Net sales 113,521,958 86,857,494
Gross profits 60,908,066 39,344,157
Operating income 31,078,620 12,344,728
Non-operating income and gains 1,253,410 1,970,525
Non-operating expenses and losses (44,113) (112,002)
Income from continuing operations before income tax 32,287,917 14,203,251
Consolidated net income 30,936,603 13,615,803
Income attributable to owners of the parent 30,961,437 13,623,070
Earnings per share (NT$) 28.44 12.35
Earnings per share adjusted (NT$) 28.44 12.35
MediaTek Inc. | 2014 Annual Report 107
2.3. 2012-2014 Condensed Statements of Comprehensive Income Parent Company Based on IFRS
Unit: NT$ thousands Item 2012 2013 2014
Net sales 63,474,029 96,230,064 136,265,018
Gross profit 22,700,240 41,335,679 68,274,360
Operating income 5,757,882 18,812,492 33,867,177
Non-operating income and expenses 10,565,227 10,395,013 16,233,126
Net income before income tax 16,323,109 29,207,505 50,100,303
Net income 15,583,745 27,515,052 46,397,892
Other Comprehensive Income, net of tax
(3,058,439) 4,245,581 7,229,587
Total comprehensive income 12,525,306 31,760,633 53,627,479
Earnings per share (NT$) 12.81 20.51 30.04
Earnings per share adjusted (NT$) 12.81 20.51 (note)
Note:
2.4. 2010-2011 Condensed Statements of Income – Parent Company - Based on ROC GAAP
Unit: NT$ thousands Item 2010 2011
Net sales 71,988,340 53,842,366
Gross profits 39,262,273 22,069,130
Operating income 17,267,046 4,839,781
Non-operating income and gains 14,971,580 9,257,428
Non-operating expenses and losses (44,947) (138,661)
Income from continuing operations before income tax 32,193,679 13,958,548
Net income 30,961,437 13,623,070
Earnings per share (NT$) 28.44 12.35
Earnings per share adjusted (NT$) 28.44 12.35
Note:
3. from 2010 to 2014
Year Accounting Firm Name of Auditors (CPA) Audio Opinion
2010 Ernst & Young Shou-Pin Kuo, Hsin-Ming Hsu Unqualified Opinions
2011 Ernst & Young Shou-Pin Kuo, Hsin-Ming Hsu Unqualified Opinions
2012 Ernst & Young Shou-Pin Kuo, Hsin-Ming Hsu Unqualified Opinions
2013 Ernst & Young Shou-Pin Kuo, Hsin-Ming Hsu Unqualified Opinions
2014 Ernst & Young Shou-Pin Kuo, Chin-Lai Wang Unqualified Opinions
MediaTek Inc. | 2014 Annual Report 108
4. Five-Year Financial Analysis
4.1. 2012-2014 Conslidated Financial Analysis MediaTek & Subsidiaries Based on IFRS Item 2012 2013 2014
Capital structure analysis
Debt ratio (%) 16.61 24.47 29.48
Long-term fund to property, plant and equipment ratio (%)
1,635.89 1,727.71 1,063.17
Liquidity Analysis
Current ratio (%) 357.02 263.49 244.59
Quick ratio (%) 311.52 245.97 220.40
Times interest earned (Times) 151.61 202.25 110.34
Operating performance analysis
Average collection turnover (Times) 11.88 11.58 12.88
Days sales outstanding 31 32 28
Average inventory turnover (Times) 4.05 5.36 5.07
Average payment turnover (Times) 6.44 7.63 8.55
Average inventory turnover days 90 68 72
Property, plant and equipment turnover (Times)
9.64 12.34 12.31
Total assets turnover (Times) 0.55 0.58 0.70
Profitability analysis
Return on total assets (%) 8.73 11.77 15.35
Return on equity attributable to owners of the parent (%)
10.66 14.82 20.95
Pre-tax income to paid-in capital (%) 122.17 218.91 333.12
Net margin (%) 15.66 20.20 21.78
Earnings per share (NT$)
Before adjustments 12.81 20.51 30.04
After adjustments 12.81 20.51 N/A
Cash flow Cash flow ratio (%) 34.58 64.47 43.62
Cash flow adequacy ratio (%) (Note) 125.00 141.34 105.66
Cash flow reinvestment ratio (%) 0.65 14.68 10.75
Leverage Operating leverage 5.72 4.13 3.60
Financial leverage 1.01 1.01 1.01
Changes that exceed 20% in the past two years and explanation for those changes:
(1) Debt ratio increased by 20%, primarily due to increase in short-term borrowings and other payables.
(2) Long-term capital to property, plant and equipment ratio decreased by 38%, primarily due to increase in property, plant and equipment.
(3) Times interest earned decreased by 45%, primarily due to increase in interest expenses.
(4) Total assets turnover increased by 20%, primarily due to increase in operating income.
(5) Return on total assets increased by 30%, return on equity increased by 41%, pre -tax income to paid-in capital increased by 52% and basic earnings per share increased by 46%, primarily due to increase in net income before income tax and net income.
(6) Cash flow ratio decreased by 32%, primarily due to increase in current liabilities.
(7) Cash flow adequacy ratio decreased by 25%, primarily due to increase in capital expenditure , inventory and cash dividend distribution.
(8) Cash flow reinvestment ratio decreased by 27%, primarily due to increase in working capital and cash dividend distribution.
Note: 2008-2011 cash inflows from operating activities were in ROC GAAP.
MediaTek Inc. | 2014 Annual Report 109
4.2. 2010-2011 Consolidated Financial Analysis MediaTek & Subsidiaries Based on ROC GAAP Item 2010 2011
Capital structure analysis
Debt ratio (%) 19.07 21.26
Long-term fund to fixed assets (%) 1,430.79 1,187.31
Liquidity Analysis
Current ratio (%) 436.65 368.22
Quick ratio (%) 391.83 335.08
Times interest earned (Times) N/A 1,515.53
Operating performance analysis
Average collection turnover (Times) 15.17 11.28
Days sales outstanding 24 32
Average inventory turnover (Times) 4.35 3.57
Average payment turnover (Times) 5.21 5.45
Average inventory turnover days 84 102
Fixed assets turnover (Times) 15.45 9.86
Total assets turnover (Times) 0.82 0.61
Profitability analysis
Return on total assets (%) 22.37 9.53
Return on equity (%) 28.05 11.94
Income to paid-in capital (%)
Operating income 282.54 107.58
Pre-tax income 293.54 123.77
Net margin (%) 27.25 15.68
Earnings Per Share (NT$)
Before adjustments 28.44 12.35
After adjustments 28.44 12.35
Cash flow Cash flow ratio (%) 114.04 54.91
Cash flow adequacy ratio (%) 149.03 125.42
Cash flow reinvestment ratio (%) 1.00 (4.99)
Leverage Operating leverage 2.68 5.27
Financial leverage 1.00 1.00
MediaTek Inc. | 2014 Annual Report 110
4.3. 2012-2014 Financial Analysis Parent Company Based on IFRS Item 2012 2013 2014
Capital
structure
analysis
Debt ratio (%) 11.41 15.25 22.58
Long-term fund to property, plant,, and
equipment ratio (%) 2,792.41 3,084.74 2,693.91
Liquidity
Analysis
Current ratio (%) 235.06 210.25 211.94
Quick ratio (%) 182.63 190.46 198.88
Times interest earned (Times) 9,414.56 1,393.09 294.80
Operating
performance
analysis
Average collection turnover (Times) 15.98 13.20 14.15
Days sales outstanding 23 28 26
Average inventory turnover (Times) 3.89 5.31 5.94
Average payment turnover (Times) 6.05 7.89 9.43
Average inventory turnover days 94 69 61.47
Property, plant, and equipment turnover
(Times) 9.93 15.26 17.57
Total assets turnover (Times) 0.38 0.45 0.50
Profitability
analysis
Return on total assets (%) 9.28 12.85 16.93
Return on equity attributable to
shareholders of the parent (%) 10.69 14.84 20.97
Pre-tax income to paid-in capital (%) 120.97 216.40 318.81
Net margin (%) 24.55 28.59 34.05
Basic earnings per
share (NT$)
Before adjustments 12.81 20.51 30.04
After adjustments 12.81 20.51 N/A
Cash flow Cash flow ratio (%) 21.33 92.35 101.08
Cash flow adequacy ratio (%) 91.43 96.33 116.95
Cash flow reinvestment ratio (%) (3.39) 9.81 21.41
Leverage Operating leverage 7.65 3.72 3.00
Financial leverage 1.00 1.00 1.01
Changes that exceed 20% in the past two years and explanation for those changes:
(1) Debt ratio increased by 48%: primarily due to increase in short-term borrowings and other payables.
(2) Times interest earned decreased by 79%: primarily due to increase in interest expenses.
(3) Return on total assets increased by 32%, return on equity increased by 41%, pre -tax income to paid-in capital
increased by 47% and basic earnings per share increased by 46%: primarily due to increase in net income
before income tax and net income.
(4) Cash flow adequacy ratio increased by 21%, and cash flow reinvestment ratio increased by 118%: primarily due
to increase in net cash flow from operating activities.
Note: 2008-2011 cash inflows from operating activities were in ROC GAAP.
MediaTek Inc. | 2014 Annual Report 111
4.4. 2010-2011 Financial Analysis Parent Company Based on ROC GAAP Item 2010 2011
Capital structure analysis
Debt ratio (%) 17.03 15.76
Long-term fund to fixed assets (%) 1,656.42 1,788.03
Liquidity Analysis
Current ratio (%) 268.84 204.95
Quick ratio (%) 230.82 173.21
Times interest earned (Times) N/A 3,086.44
Operating performance analysis
Average collection turnover (Times) 20.03 14.17
Days sales outstanding 18 26
Average inventory turnover (Times) 3.85 3.42
Average payment turnover (Times) 4.73 4.84
Average inventory turnover days 95 107
Fixed assets turnover (Times) 11.39 8.13
Total assets turnover (Times) 0.54 0.39
Profitability analysis
Return on total assets (%) 23.14 9.99
Return on equity (%) 28.07 11.95
Income to paid-in capital (%) Operating income 156.98 42.18
Pre-tax income 292.68 121.64
Net margin (%) 43.01 25.30
Earnings Per Share (NT$) Before adjustments 28.44 12.35
After adjustments 28.44 12.35
Cash flow Cash flow ratio (%) 70.59 38.50
Cash flow adequacy ratio (%) 127.62 104.22
Cash flow reinvestment ratio (%) (11.91) (12.41)
Leverage Operating leverage 2.94 7.52
Financial leverage 1.00 1.00
MediaTek Inc. | 2014 Annual Report 112
Glossary: 1. Capital Structure Analysis: (1). Debt ratio = Total liabilities / Total assets (2). Long- -current liabilities) / Net property,
plant and equipment 2. Liquidity Analysis: (1). Current ratio = Current assets / Current liabilities (2). Quick ratio = (Current assets inventories prepaid Expenses) / Current liabilities (3). Times interest earned = Earnings before interest and taxes / Interest expenses 3. Operating Performance Analysis:
(1). Average collection turnover = Net sales / Average trade receivables (2). Days sales outstanding = 365 / Average collection turnover (3). Average inventory turnover = Operating costs / Average inventory (4). Average payment turnover = operating costs / Average trade payables (5). Average inventory turnover days = 365 / Average Inventory turnover (6). Property, plant and equipment turnover = Net sales / Average property, plant and equipment
(7). Total assets turnover = Net sales / total assets 4. Profitability Analysis: (1). Return on total assets = [Net income + Interest expenses x (1 tax rate)] / Average total assets (2). Return on equity attributable to shareholders of the parent = Net income attributable to shareholders of the parent /
Average equity attributable to shareholders of the parent (3) Pre-tax income to paid-in capital ratio = Income before tax / Paid-in capital (4) Net margin = Net income / Net sales
(5). Earnings per share = (Net income attributable to shareholders of the parent preferred stock dividend) / Weighted average number of shares outstanding
5. Cash Flow: (1). Cash flow ratio = Net cash provided by operating activities / Current Liabilities (2). Cash flow adequacy ratio = Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory
additions, and cash dividend
(3). Cash flow reinvestment ratio = (Cash provided by operating activities cash dividends) / (Gross property, plant and equipment + Long-term investments + other noncurrent assets + working capital)
6. Leverage: (1). Operating leverage = (Net sales Variable cost) / Operating income (2). Financial leverage = Operating income / (Operating income Interest expenses)
Glossary (ROC GAAP): 1. Capital Structure Analysis: (1). Debt ratio = Total liabilities / Total assets (2). Long- -term liabilities) / Net fixed assets 2. Liquidity Analysis: (1). Current ratio = Current assets / Current liabilities (2). Quick ratio = (Current assets Inventories Prepaid Expenses) / Current liabilities
(3). Times interest earned = Earnings before interest and taxes / Interest expenses 3. Operating Performance Analysis: (1). Average collection turnover = Net sales / Average trade receivables (2). Days sales outstanding = 365 / Average collection turnover (3). Average inventory turnover = Operating costs / Average inventory (4). Average payment turnover = operating costs / Average trade payables
(5). Average inventory turnover days = 365 / Average Inventory turnover (6) Fixed assets turnover = Net sales / Average net fixed assets (7). Total assets turnover = Net sales / Average total assets 4. Profitability Analysis: (1). Return on total assets = [Net income + Interest expenses x (1 tax rate)] / Average total assets
(3) Operating income to paid-in capital ratio = Operating income / Paid-in capital (4) Pre-tax income to Paid-in capital ratio = Income before tax / Paid-in capital (5) Net margin = Net income / Net sales (6). Earnings per share = (Net income preferred stock dividend) / Weighted average number of shares outstanding 5. Cash Flow: (1). Cash flow ratio = Net cash provided by operating activities / Current Liabilities (2). Cash flow adequacy ratio = Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory
additions, and cash dividend (3). Cash flow reinvestment ratio = (Cash provided by operating activities cash dividends) / (Gross fixed assets + Long-term
investments + other assets + working capital) 6. Leverage: (1). Operating leverage = (Net sales Variable cost) / Operating income (2). Financial leverage = Operating income / (Operating income Interest expenses)
MediaTek Inc. | 2014 Annual Report 113
5.
MediaTek Inc.
The Financial Statements of MediaTek Inc. in fiscal year 2014 have been duly audited by Ernst
& Young and are believed to fairly represent the financial standing, operation results and cash
flows of MediaTek Inc. We, the Supervisors, have duly reviewed the Financial Statements along
with the Business Report and proposal for profits distribution and hereby verify that they
comply with the requirements of Company Law and relevant regulations. This report is duly
submitted in accordance with Article 219 of the Company Law, and we hereby submit this
report.
To MediaTek Inc. 2015
MediaTek Inc.
Supervisor: Paul Wang
Supervisor: Chung-Lang Liu (MediaTek Capital Corp., representative)
Supervisor: Ruey-Shan Guo (National Taiwan University, representative)
April 30, 2015
MediaTek Inc. | 2014 Annual Report 114
6. Financial S
Report MediaTek & Subsidiaries (Page F1 Page F95)
7.
Report Parent Company (Page F96 Page F174)
English Translation of a Report and Financial Statements Originally Issued in Chinese
MEDIATEK INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTSWITH
REPORT OF INDEPENDENT ACCOUNTANTS
FOR THE YEARS THEN ENDEDDecember 31, 2014 AND 2013
MediaTek Inc. | 2014 Annual Report F-1
REPRESENTATION LETTER
The entities included in the consolidated financial statements as of December 31, 2014 and for
the year then ended prepared under the International Accounting Standards No.27
�Consolidated and Separate Financial Statement� (referred to as �Consolidated Financial
Statements�) are the same as the entities to be included in the combined financial statements
of the Company, if any to be prepared, pursuant to the Criteria Governing Preparation of
Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of
Affiliated Enterprises (referred to as �Combined Financial Statements�). Also, the footnotes
disclosed in the Consolidated Financial Statements have fully covered the required
information in such Combined Financial Statements. Accordingly, the Company did not
prepare any other set of Combined Financial Statements than the Consolidated Financial
Statements.
Very truly yours,
MediaTek Inc.
Chairman: Ming-Kai Tsai
March 19, 2015
MediaTek Inc. | 2014 Annual Report F-2
MediaTek Inc. | 2014 Annual Report F-3
ASS
ET
SN
otes
Dec
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2014
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1,20
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ash
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MediaTek Inc. | 2014 Annual Report F-4
LIA
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MediaTek Inc. | 2014 Annual Report F-5
Description Notes 2014 % 2013 %
Net sales 4, 5, 6(17),7 213,062,916$ 100 136,055,954$ 100
Operating costs 4, 5, 6(8), 6(18), 7 (109,194,295) (51) (76,250,370) (56)
Gross profit 103,868,621 49 59,805,584 44
Operating expenses 6(18), 7
Selling expenses (7,372,827) (4) (4,561,934) (3)
Administrative expenses (5,917,136) (3) (3,545,988) (3)
Research and development expenses (43,337,348) (20) (26,453,942) (19)
Total operating expenses (56,627,311) (27) (34,561,864) (25)
Operating income 47,241,310 22 25,243,720 19
Non-operating income and expenses
Other income 4, 6(19), 7 3,483,335 2 2,402,627 2
Other gains and losses 4, 6(20), 6(24) 1,120,151 1 (103,672) -
Finance costs 6(21) (478,782) - (146,816) -
Share of profit of associates accounted for using the equity method 4, 6(9) 983,941 - 2,150,963 1
Total non-operating income and expenses 5,108,645 3 4,303,102 3
Net income before income tax 52,349,955 25 29,546,822 22
Income tax expense 4, 5, 6(22) (5,950,882) (3) (2,062,172) (2)
Net income 46,399,073 22 27,484,650 20
Other comprehensive income 4, 6(9), 6(14), 6(15), 6(22)Exchange differences resulting from translating the financial
statements of foreign operations 6,684,653 3 1,811,177 1
Unrealized gains from available-for-sale financial assets 878,929 - 929,781 1
Actuarial losses on defined benefit plans (328,043) - (42,044) -Share of other comprehensive income of associates accounted for
using the equity method(22,549) - 1,554,911 1
Income tax relating to components of other comprehensive income 55,768 - - -
Other comprehensive income, net of tax 7,268,758 3 4,253,825 3
Total comprehensive income 53,667,831$ 25 31,738,475$ 23
Net income (loss) for the periods attributable to :
Owners of the parent 6(23) 46,397,892$ 27,515,052$
Non-controlling interests 6(15) 1,181 (30,402)
46,399,073$ 27,484,650$
Total comprehensive income for the periods attributable to :
Owners of the parent 53,627,479$ 31,760,633$
Non-controlling interests 6(15) 40,352 (22,158)
53,667,831$ 31,738,475$
Basic Earnings Per Share (in New Taiwan Dollars) 6(23) 30.04$ 20.51$
Diluted Earnings Per Share (in New Taiwan Dollars) 6(23) 29.96$ 20.42$
Chairman : Ming-Kai Tsai President : Ching-Jiang Hsieh Chief Financial Officer : David Ku
The accompanying notes are an integral part of the consolidated financial statements.
English Translation of Financial Statements Originally Issued in Chinese
MEDIATEK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2014 and 2013
(Amounts in thousands of New Taiwan Dollars, except for earnings per share)
MediaTek Inc. | 2014 Annual Report F-6
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MediaTek Inc. | 2014 Annual Report F-7
(Amounts in thousands of New Taiwan Dollars)
2014 2013Cash flows from operating activities :
Profit before tax from continuing operations 52,349,955$ 29,546,822$Adjustments for:
The profit or loss items which did not affect cash flows: Depreciation 1,312,641 1,182,191
Amortization 1,453,158 544,639 Bad debt provision (reversal) 26,806 (79,110)
Losses on financial assets and liabilities at fair value through profit or loss 40,242 9,155Interest expenses 478,782 146,816Interest income (3,125,381) (1,755,482)
Dividend income (238,877) (167,855)Share-based payment expenses 63,935 75,799Share of profit of associates accounted for using the equity method (983,941) (2,150,963)Loss on disposal of property, plant and equipment 2,775 3,137
(Gain) loss on disposal of investments (928,953) 48,008Impairment of financial assets 263,372 478,110
Changes in operating assets and liabilities�Financial assets at fair value through profit or loss (3,783,596) (1,418,009)Trade receivables (483,221) (983,242)
Other receivables (839,604) 1,186,065Inventories (8,836,098) 4,532,449Prepayments (711,574) (263,240)
Other current assets (309,172) (33,922)Trade payables 1,883,426 819,786Trade payables to related parties (1,456,969) 1,054,687
Other payables 11,673,202 3,376,421 Other current liabilities (730,994) 736,536
Long-term payables (24,823) (25,961)Accrued pension liabilities 62,085 8,235
Non-current liabilities-others 38,755 33,446Cash generated from operating activities
Interest received 2,752,253 1,991,816 Dividend received 355,312 1,744,746
Interest paid (485,217) (125,582)Income tax paid (5,488,505) (942,777)
Net cash provided by operating activities 44,329,774 39,572,721Cash flows from investing activities :
Acquisition of available-for-sale financial assets (4,344,406) (1,377,363)Proceeds from disposal of available-for-sale financial assets 827,975 1,469,999Acquisition of bond investments for which no active market exists (1,923,564) (43)Proceeds from disposal of bond investments for which no active market exists 959,768 -Acquisition of held-to-maturity financial assets - (72,743)Proceeds from disposal of held-to-maturity financial assets 824,381 -Acquisition of financial assets measured at cost (1,857,157) (626,407)Proceeds from disposal of financial assets measured at cost 935,500 299Proceeds from capital return of financial assets measured at cost 41,835 322,344Acquisition of investments accounted for using the equity method (204,887) (91,571)
Net cash inflows from acquisition of subsidiaries 33,097,485 - Net cash inflows from disposal of subsidiaries - 6,119
Acquisition of property, plant and equipment (9,828,126) (1,628,684)Proceeds from disposal of property, plant and equipment 105,504 43,510
(Increase) decrease in refundable deposits (35,360) 68,800Acquisition of intangible assets (795,756) (324,414)Increase in long-term prepaid rent (1,425) (4,148)
Net cash provided by (used in) investing activities 17,801,767 (2,214,302)Cash flows from financing activities :
Increase in short-term borrowings 17,109,093 19,983,850 Decrease in long-term borrowings (651,000) -
Increase in deposits received 50,406 17,521Proceeds from exercise of employee stock options 223,003 94,732
Cash dividends (23,448,412) (12,074,279)Increase in non-controlling interests 560,126 26,142
Net cash (used in) provided by financing activities (6,156,784) 8,047,966Effect of changes in exchange rate on cash and cash equivalents 3,825,023 1,724,131Net increase in cash and cash equivalents 59,799,780 47,130,516Cash and cash equivalents at the beginning of the year 132,997,726 85,867,210
Cash and cash equivalents at the end of the year 192,797,506$ 132,997,726$
Chairman : Ming-Kai Tsai President : Ching-Jiang Hsieh Chief Financial Officer : David Ku
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2014 and 2013
Description
The accompanying notes are an integral part of the consolidated financial statements.
MediaTek Inc. | 2014 Annual Report F-8
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
1. Organization and OperationAs officially approved, MediaTek Inc. ("MTK") was incorporated at Hsinchu Science-basedIndustrial Park on May 28, 1997. Since then, it has been specialized in the R&D, production,manufacturing and marketing of multimedia integrated circuits (ICs), computer peripheralsoriented ICs, high-end consumer-oriented ICs and other ICs of extraordinary application.Meanwhile, it has rendered design, test runs, maintenance and repair and technologicalconsultation services for software & hardware of the aforementioned products, import and exporttrades for the aforementioned products, sale and delegation of patents and circuit layout rights forthe aforementioned products.
2. Date and Procedures of Authorization of Financial Statements for IssueThe consolidated financial statements were authorized for issue in accordance with a resolutionof the Board of Directors on March 19, 2015.
3. Newly Issued or Revised Standards and Interpretations(1) Standards or interpretations issued, revised or amended, which recognized by Financial
Supervisory Commission (�FSC�) and effective for annual periods beginning on or afterJanuary 1, 2015, but not yet adopted by MTK and its subsidiaries (�the Company�) at thedate of issuance of the Company�s financial statements are listed below:
Standards orInterpretations Numbers The Projects of Standards or Interpretations Effective DatesImprovements to International Financial Reporting Standards (issued in 2010)
IFRS 1 �First-time Adoption of International FinancialReporting Standards�
January 1, 2011
IFRS 3 �Business Combinations� July 1, 2010IFRS 7 �Financial Instruments: Disclosures� January 1, 2011IAS 1 �Presentation of Financial Statements� January 1, 2011IAS 34 �Interim Financial Reporting� January 1, 2011IFRIC 13 �Customer Loyalty Programmes� January 1, 2011
IFRS 7 Limited Exemption from ComparativeDisclosures for First-time Adopters(Amendments to IFRS 1 �First-timeAdoption of International FinancialReporting Standards�)
July 1, 2010
(To be continued)
MediaTek Inc. | 2014 Annual Report F-9
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)Standards or
Interpretations Numbers The Projects of Standards or Interpretations Effective DatesIFRS 1 �First-time Adoption of International Financial
Reporting Standards� - Severe Hyperinflationand Removal of Fixed Dates for First-timeAdopter
July 1, 2011
IFRS 7 �Financial Instruments: Disclosures�(Amendment)
July 1, 2011
IAS 12 �Income Taxes� (Amendment) - DeferredTaxes: Recovery of Underlying Assets
January 1, 2012
IFRS 10 �Consolidated Financial Statements� January 1, 2013IFRS 11 �Joint Arrangements� January 1, 2013IFRS 12 �Disclosures of Interests in Other Entities� January 1, 2013IFRS 13 �Fair Value Measurement� January 1, 2013IAS 1 �Presentation of Financial Statements�
(Amendment) - Presentation of Items ofOther Comprehensive Income
July 1, 2012
IAS 19 �Employee Benefits� (Revision) January 1, 2013IFRS 1 �First-time Adoption of International Financial
Reporting Standards� - Government LoansJanuary 1, 2013
IFRS 7 �Financial Instruments: Disclosures�(Amendment) - Disclosures - OffsettingFinancial Assets and Financial Liabilities
January 1, 2013
IAS 32 �Financial Instruments: Presentation�(Amendment) - Offsetting Financial Assetsand Financial Liabilities
January 1, 2014
IFRIC 20 �Stripping Costs in the Production Phase of aSurface Mine�
January 1, 2013
Improvements to International Financial Reporting Standards (2009-2011 cycle):IFRS 1 �First-time Adoption of International Financial
Reporting Standards�January 1, 2013
IAS 1 �Presentation of Financial Statements� January 1, 2013IAS 16 �Property, Plant and Equipment� January 1, 2013IAS 32 �Financial Instruments: Presentation� January 1, 2013
(To be continued)
MediaTek Inc. | 2014 Annual Report F-10
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)Standards or
Interpretations Numbers The Projects of Standards or Interpretations Effective DatesIAS 34 �Interim Financial Reporting� January 1, 2013
IFRS 10 �Consolidated Financial Statements�(Amendment)
January 1, 2014
A. Improvements to International Financial Reporting Standards (issued in 2010):a. IFRS 7�Financial Instruments: Disclosures�
The amendment emphasizes the interaction between quantitative and qualitativedisclosures and the nature and extent of risks associated with financial instruments.
b. IAS 1�Presentation of Financial Statements�The amendment clarifies that an entity will present an analysis of other comprehensiveincome for each component of equity, either in the statement of changes in equity or inthe notes to the financial statements.
c. IAS 34�Interim Financial Reporting�The amendment clarifies that if a user of an entity's interim financial report haveaccess to the most recent annual financial report of that entity, it is unnecessary for thenotes to an interim financial report to provide relatively insignificant updates to theinformation that was reported in the notes in the most recent annual financial report.Furthermore, the amendment adds disclosure requirements of financial instruments andcontingent liabilities/assets.
B. IFRS 10 �Consolidated Financial Statements�IFRS 10 replaces the portion of IAS 27 that addresses the accounting for consolidatedfinancial statements and SIC-12. The changes introduced by IFRS 10 primarily relate tothe elimination of the perceived inconsistency between IAS 27 and SIC-12 by introducinga new integrated control model. That is, IFRS 10 primarily relates to whether toconsolidate another entity, but does not change how an entity is consolidated.
C. IFRS 12 �Disclosures of Interests in Other Entities�IFRS 12 primarily integrates and makes consistent the disclosure requirements forsubsidiaries, joint arrangements, associates and unconsolidated structured entities.
MediaTek Inc. | 2014 Annual Report F-11
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
D. IFRS 13 �Fair Value Measurement�IFRS 13 primarily relates to defining fair value, setting out in a single IFRS a frameworkfor measuring fair value and requiring disclosures about fair value measurements toreduce complexity and improve consistency in application when measuring fair value.However, IFRS 13 does not change existing requirements in other IFRS as to when thefair value measurement or related disclosures required.
E. IAS 1�Presentation of Financial Statements� (Amendment) - Presentation of Items ofOther Comprehensive IncomeThe amendments to IAS 1 change the grouping of items presented in othercomprehensive income. Items that would be reclassified (or recycled) to profit or loss inthe future would be presented separately from items that will never be reclassified.
F. IAS 19 �Employee Benefits� (Revision)The revision includes: (1) For defined benefit plans, the ability to defer recognition ofactuarial gains and losses (i.e., the corridor approach) has been removed. Actuarial gainsand losses are now recognized in other comprehensive income. (2) Amounts recorded inprofit or loss are limited to current and past service costs, gains or losses on settlements,and net interest income (expense). (3) New disclosures include quantitative informationabout the sensitivity of the defined benefit obligation to a reasonably possible change ineach significant actuarial assumption. (4) Termination benefits will be recognized at theearlier of when the offer of termination cannot be withdrawn, or when the relatedrestructuring costs are recognized under IAS 37 �Provisions, Contingent Liabilities andContingent Assets�, etc.
G. Improvements to International Financial Reporting Standards (2009-2011 cycle):IAS 1 �Presentation of Financial Statements�The amendment clarifies (1) the difference between voluntary additional comparativeinformation and the minimum required comparative information. Generally, the minimumrequired comparative period is the previous period. (2) An entity must includecomparative information in the related notes to the financial statements when itvoluntarily provides comparative information beyond the minimum required comparativeperiod. The additional comparative period does not need to contain a complete set offinancial statements. (3) The opening statement of financial position (known as �the thirdbalance sheet�) must be presented when an entity changes its accounting policies (makingretrospective restatements or reclassifications) and those changes have a material effecton the statement of financial position. The opening statement would be at the beginningof the preceding period. However, unlike the voluntary comparative information, therelated notes are not required to include comparatives as of the date of the third balancesheet.
MediaTek Inc. | 2014 Annual Report F-12
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
IAS 34 �Interim Financial Reporting�The amendment clarifies the requirements in IAS 34 relating to segment information fortotal assets and liabilities for each reportable segment to enhance consistency with therequirements in IFRS 8 �Operating Segments�. Besides, total assets and liabilities for aparticular reportable segment need to be disclosed only when the amounts are regularlyprovided to the chief operating decision maker and there has been a material change inthe total amount disclosed in the entity�s previous annual financial statements for thatreportable segment.
The abovementioned standards and interpretations issued by IASB and have been recognizedby FSC are effective for annual periods beginning on or after January 1, 2015. The Companyhas evaluated their impact to the Company�s financial position and performance anddetermined that there is no material impact. The Company will make necessary disclosures inaccordance with the abovementioned standards and interpretations.
(2) Standards or Interpretations issued by IASB but not yet recognized by FSC at the date ofissuance of the Company�s financial statements are listed below:
Standards orInterpretations Numbers The Projects of Standards or Interpretations
EffectiveDates
IAS 36 �Impairment of Assets� (Amendment) January 1, 2014IFRIC 21 �Levies� January 1, 2014IAS 39 �Novation of Derivatives and Continuation of
Hedge Accounting�January 1, 2014
IAS 19 �Employee Benefits� (Amendment) - Definedbenefit plans: employee contributions
July 1, 2014
Improvements to International Financial Reporting Standards (2010-2012 cycle):IFRS 2 �Share-based Payment� July 1, 2014IFRS 3 �Business Combinations� July 1, 2014IFRS 8 �Operating Segments� July 1, 2014IFRS 13 �Fair Value Measurement� July 1, 2014IAS 16 �Property, Plant and Equipment� July 1, 2014IAS 24 �Related Party Disclosures� July 1, 2014IAS 38 �Intangible Assets� July 1, 2014
Improvements to International Financial Reporting Standards (2011-2013 cycle):IFRS 1 �First-time Adoption of International Financial
Reporting Standards�July 1, 2014
IFRS 3 �Business Combinations� July 1, 2014IFRS 13 �Fair Value Measurement� July 1, 2014
(To be continued)
MediaTek Inc. | 2014 Annual Report F-13
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)
Standards or
Interpretations Numbers The Projects of Standards or Interpretations
Effective
Dates
IAS 40 �Investment Property� July 1, 2014
IFRS 14 �Regulatory Deferral Accounts� January 1, 2016
IFRS 11 �Joint Arrangements�- Joint operation
(Amendment)
January 1, 2016
IAS 16 and IAS 38 �Property, Plant and Equipment� and�Intangible Assets� (Amendment)- Clarification of Acceptable Methods ofDepreciation and Amortization
January 1, 2016
IFRS 15 �Revenue from Contracts with Customers� January 1, 2017
IAS 16 and IAS 41 �Agriculture: Bearer Plants� (Amendment) January 1, 2016
IFRS 9 �Financial Instruments� January 1, 2018
IAS 27 �Separate Financial Statements� - Equity
Method in Separate Financial Statements
(Amendment)
January 1, 2016
IFRS 10 and IAS 28 �Consolidated Financial Statements� and
�Investments in Associates and Joint
Ventures� (Amendment) - Sale or
Contribution of Assets between an Investor
and its Associate or Joint Ventures
January 1, 2016
Improvements to International Financial Reporting Standards (2012-2014 cycle):
IFRS 5 �Non-current Assets Held for Sale and
Discontinued Operations�
January 1, 2016
IFRS 7 �Financial Instruments: Disclosures� January 1, 2016
IAS 19 �Employee Benefits� January 1, 2016
IAS 34 �Interim Financial Reporting� January 1, 2016
IAS 1 �Presentation of Financial Statements�-
Diclosure Initiative
January 1, 2016
IFRS 10, IFRS 12 and
IAS 28
�Investment Entities�- Applying the
Consolidation Exception
January 1, 2016
MediaTek Inc. | 2014 Annual Report F-14
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
A. IAS 36�Impairment of Assets� (Amendment)This amendment relates to the amendment issued in May 2011 and requires entities todisclose the recoverable amount of an asset (including goodwill) or a cash-generating unitwhen an impairment loss has been recognized or reversed during the period. Theamendment also requires detailed disclosure of how the fair value less costs of disposalhas been measured when an impairment loss has been recognized or reversed, includingvaluation techniques used, level of fair value hierarchy of assets and key assumptionsused in measurement.
B. Improvements to International Financial Reporting Standards (2010-2012 cycle):IFRS 8 �Operating Segments�The amendments require an entity to disclose the judgments made by management inapplying the aggregation criteria to operating segments. The amendments also clarify thatan entity shall only provide reconciliations of the total of the reportable segments' assetsto the entity's assets if the segment assets are reported regularly.
C. Improvements to International Financial Reporting Standards (2011-2013 cycle):IFRS 13 �Fair Value Measurement�The amendment clarifies that paragraph 52 of IFRS 13 includes a scope exception formeasuring the fair value of a group of financial assets and financial liabilities on a netbasis. The objective of this amendment is to clarify that this portfolio exception applies toall contracts within the scope of IAS 39 Financial Instruments: Recognition andMeasurement or IFRS 9 Financial Instruments, regardless of whether they meet thedefinitions of financial assets or financial liabilities as defined in IAS 32 FinancialInstruments: Presentation.
D. IFRS 15 �Revenue from Contracts with Customers�The core principle of the new Standard is for companies to recognize revenue to depictthe transfer of goods or services to customers in amounts that reflect the consideration towhich the company expects to be entitled in exchange for those goods or services. Thenew Standard will also result in enhanced disclosures about revenue, provide guidance fortransactions that were not previously addressed comprehensively and improve guidancefor multiple-element arrangements.
E. IFRS 9 �Financial Instruments�The IASB has issued the final version of IFRS 9, which combines classification andmeasurement, impairment and hedge accounting. The standard will replace IAS 39�Financial Instruments: Recognition and Measurement� and all previous versions of IFRS9 �Financial Instruments� (which include standards issued on classification andmeasurement of financial assets and liabilities and hedge accounting).
MediaTek Inc. | 2014 Annual Report F-15
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Classification and measurement: Financial assets are measured at amortized cost, fairvalue through profit or loss, or fair value through other comprehensive income, based onboth the entity�s business model for managing the financial assets and the financialasset�s contractual cash flow characteristics. Financial liabilities are measured atamortized cost or fair value through profit or loss. Furthermore there is requirement that�own credit risk� adjustments are not recognized in profit or loss.
Impairment: Expected credit loss model is used to evaluate impairment. Entities arerequired to recognize either 12-month or lifetime expected credit losses, depending onwhether there has been a significant increase in credit risk since initial recognition.
Hedge accounting: Hedge accounting is more closely aligned with risk managementactivities and hedge effectiveness is measured based on the hedge ratio.
F. IAS 1 �Presentation of Financial Statements�The amendments contain (1) clarifying that an entity must not reduce theunderstandability of its financial statements by obscuring material information withimmaterial information or by aggregating material items that have different natures orfunctions. The amendments reemphasize that, when a standard requires a specificdisclosure, the information must be assessed to determine whether it is material and,consequently, whether presentation or disclosure of that information is warranted, (2)clarifying that specific line items in the statement(s) of profit or loss and OCI and thestatement of financial position may be disaggregated, and how an entity shall presentadditional subtotals, (3) clarifying that entities have flexibility as to the order in whichthey present the notes to financial statements, but also emphasize that understandabilityand comparability should be considered by an entity when deciding on that order, (4)removing the examples of the income taxes accounting policy and the foreign currencyaccounting policy, as these were considered unhelpful in illustrating what significantaccounting policies could be, and (5) clarifying that the share of OCI of associates andjoint ventures accounted for using the equity method must be presented in aggregate as asingle line item, classified between those items that will or will not be subsequentlyreclassified to profit or loss.
The abovementioned standards and interpretations issued by IASB have not yet been recognizedby FSC at the date of issuance of the Company�s financial statements, the local effective datesare to be determined by FSC. As the Company is still currently determining the potential impactof the standards and interpretations listed under A~F, it is not practicable to estimate their impacton the Company at this point in time. All other standards and interpretations have no materialimpact on the Company.
MediaTek Inc. | 2014 Annual Report F-16
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
4. Summary of Significant Accounting PoliciesStatement of ComplianceThe consolidated financial statements have been prepared in accordance with the RegulationsGoverning the Preparation of Financial Reports by Securities Issuers (�the Regulations�) andTIFRS as endorsed by the FSC.
Basis of PreparationThe consolidated financial statements have been prepared on a historical cost basis, except forfinancial instruments that have been measured at fair value. The consolidated financial statementsare expressed in thousands of New Taiwan Dollars (�NT$�) unless otherwise stated.
Basis of ConsolidationPreparation principle of consolidated financial statementsSubsidiaries are fully consolidated from the acquisition date, being the date on which theCompany obtains control, and continue to be consolidated until the date that such control ceases.The financial statements of the subsidiaries are prepared for the same reporting period as theparent company, using uniform accounting policies. All intra-group balances, income andexpenses, unrealized gains and losses and dividends resulting from intra-group transactions areeliminated in full.
A change in the ownership interest of a subsidiary, without a change of control, is accounted foras an equity transaction.
Total comprehensive income of the subsidiaries is attributed to the owners of the parent and tothe non-controlling interests even if this results in the non-controlling interests having a deficitbalance.
If the Company loses control of a subsidiary, it:a. derecognizes the assets (including goodwill) and liabilities of the subsidiary;b. derecognizes the carrying amount of any non-controlling interest;c. recognizes the fair value of the consideration received;d. recognizes the fair value of any investment retained;e. recognizes any surplus or deficit in profit or loss; andf. reclassifies the parent�s share of components previously recognized in other comprehensive
income to profit or loss.
MediaTek Inc. | 2014 Annual Report F-17
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The consolidated entities are listed as follows:Percentage of Ownership
Investor Subsidiary Business nature
December 31,
2014
December 31,
2013 Note
MTK MediaTek Investment
Corp.
General investing - 100% 1
MTK Hsu-Ta Investment Corp. General investing 100% 100% -
MTK MediaTek Singapore Pte.
Ltd.
Research,
manufacturing and
sales
100% 100% -
MTK Ralink Technology Corp. Research,
manufacturing and
sales
- 100% 2
MTK MediaTek Investment
Singapore Pte. Ltd.
General investing 100% - 1&3
MTK T-Rich Technology
(Cayman) Corp.
General investing 100% - 2
MTK MStar Semiconductor,
Inc.
Research,
manufacturing and
sales
100% - 3&11
Hsu-Ta Investment
Corp.
Core Tech Resources
Inc.
General investing 100% 100% -
Hsu-Ta Investment
Corp.
MediaTek Capital Corp. General investing 100% - 4
Hsu-Ta Investment
Corp.
MediaTek Bangalore
Private Limited
Research 0% - 5
MediaTek Investment
Corp.
MediaTek Capital Corp. General investing - 100% 4
MediaTek Investment
Corp.
Gaintech Co. Limited General investing - 100% 1
Ralink Technology
Corp.
T-Rich Technology
(Cayman) Corp.
General investing - 100% 2
Ralink Technology
Corp.
MediaTek USA Inc. Research - 11% 2
MediaTek Singapore
Pte. Ltd.
MTK Wireless LLC
(Dubai)
Technology services - 100% 6
(To be continued)
MediaTek Inc. | 2014 Annual Report F-18
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)
Percentage of Ownership
Investor Subsidiary Business nature
December 31,
2014
December 31,
2013 Note
MediaTek Capital
Corp.
RollTech Technology
Co., Ltd.
Software development 67% 67% -
MediaTek Capital
Corp.
E-Vehicle
Semiconductor
Technology Co., Ltd.
Research,
manufacturing and
sales
72% 72% -
Core Tech Resources
Inc.
MediaTek India
Technology Pvt. Ltd.
Research 0% 0% -
Gaintech Co. Limited MediaTek China
Limited
General investing 100% 100% -
Gaintech Co. Limited MTK Wireless Limited
(UK)
Research 100% 100% -
Gaintech Co. Limited MediaTek Denmark
Aps
Research - 100% 7
Gaintech Co. Limited MediaTek Japan Inc. Research 100% 100% -
Gaintech Co. Limited MediaTek India
Technology Pvt. Ltd.
Research 100% 100% -
Gaintech Co. Limited MediaTek Korea Inc. Research 100% 100% -
Gaintech Co. Limited MediaTek USA Inc. Research - 89% 7
Gaintech Co. Limited Hesine Technologies
International
Worldwide Inc.
General investing 65% 65% -
Gaintech Co. Limited Gold Rich International
(Samoa) Limited
General investing 100% 100% -
Gaintech Co. Limited Smarthead Limited General investing 100% 100% -
Gaintech Co. Limited Lepower Limited General investing 100% 84% -
Gaintech Co. Limited Ralink Technology
(Samoa) Corp.
General investing 100% 100% -
Gaintech Co. Limited MediaTek Sweden AB Research - 100% 7
Gaintech Co. Limited EcoNet (Cayman) Inc. General investing 88% 100% -
Gaintech Co. Limited MediaTek Wireless
FZ-LLC
Technology services 100% 100% -
MediaTek China
Limited
MediaTek (Hefei) Inc. Research 100% 100% -
(To be continued)
MediaTek Inc. | 2014 Annual Report F-19
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)
Percentage of Ownership
Investor Subsidiary Business nature
December 31,
2014
December 31,
2013 Note
MediaTek China
Limited
MediaTek (Beijing)
Inc.
Research 100% 100% -
MediaTek China
Limited
MediaTek (Shenzhen)
Inc.
Research and
technology services
100% 100% -
MediaTek China
Limited
MediaTek (Chengdu)
Inc.
Research 100% 100% -
MediaTek China
Limited
MediaTek (Wuhan)
Inc.
Research 100% 100% -
MediaTek China
Limited
MediaTek (Shanghai)
Inc.
Research 100% 100% -
MediaTek China
Limited
MStar Chen Si
Electronics
Technology
(Shanghai) Co., Ltd.
Research and
technology services
100% - 12
MTK Wireless Limited
(UK)
MediaTek Sweden AB Research 100% - 7
MTK Wireless Limited
(UK)
MediaTek USA Inc. Research 100% - 2&7
MTK Wireless Limited
(UK)
MediaTek Denmark
Aps
Research 100% - 7
MTK Wireless Limited
(UK)
MediaTek Wireless
Finland Oy
Research 100% - 10
MediaTek USA Inc. Ralink Technology
Corporation (USA)
Research - 100% 8
Hesine Technologies
International
Worldwide Inc.
Hesine Technologies,
Inc.
Technology services 100% 100% -
Gold Rich
International
(Samoa) Limited
Gold Rich International
(HK) Limited
General investing 100% 100% -
Lepower Limited Lepower (HK) Limited General investing 100% 100% -
Lepower (HK) Limited Lepower Technologies
(Beijing), Inc.
Research,
manufacturing and
sales
91% 100% -
(To be continued)
MediaTek Inc. | 2014 Annual Report F-20
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)
Percentage of Ownership
Investor Subsidiary Business nature
December 31,
2014
December 31,
2013 Note
E-Vehicle
Semiconductor
Technology Co., Ltd.
E-Vehicle Holdings
Corp.
General investing 100% 100% -
E-Vehicle Holdings
Corp.
E-Vehicle Investment
Limited
General investing 100% 100% -
E-Vehicle InvestmentLimited
E-VehicleSemiconductor(Shanghai) Co., Ltd.
Research,manufacturing andsales
100% 100% -
EcoNet (Cayman) Inc. Shadow InvestmentLimited
General investing 100% 100% -
EcoNet (Cayman) Inc. EcoNet (HK) Limited Research,manufacturing andsales
100% 100% -
EcoNet (HK) Limited EcoNet (Suzhou)Limited
Research,manufacturing andsales
100% - 9
Shadow InvestmentLimited
MediaTek (Suzhou)Inc.
Research 100% 100% -
Shadow InvestmentLimited
MediaTek (Nanjing)Inc.
Research 100% 100% -
Ralink Technology(Samoa) Corp.
AutoChips Inc. Research,manufacturing andsales
89% 100% -
MediaTek InvestmentSingapore Pte. Ltd.
MStar SemiconductorB.V.
General investing 100% - 3
MediaTek InvestmentSingapore Pte. Ltd.
Lightup InternationalCorp.
General investing 100% - 3
MediaTek InvestmentSingapore Pte. Ltd.
MediaTek BangalorePrivate Limited
Research 100% - 5
MediaTek InvestmentSingapore Pte. Ltd.
Gaintech Co. Limited General investing 100% - 1
MStar SemiconductorB.V.
White Dwarf Limited General investing 100% - 3
MStar Semiconductor,
Inc.
MStar France SAS Software development 100% - 3
MStar Semiconductor,
Inc.
Shunfonger Investment
Holding Limited
General investing 100% - 3
(To be continued)
MediaTek Inc. | 2014 Annual Report F-21
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)
Percentage of Ownership
Investor Subsidiary Business nature
December 31,
2014
December 31,
2013 Note
MStar Semiconductor,
Inc.
IStar Technology Ltd. General investing and
sales
100% - 3
MStar Semiconductor,
Inc.
MStar Co., Ltd. General investing 100% - 3
MStar Semiconductor,
Inc.
Digimoc Holdings
Limited
General investing 100% - 3
MStar Semiconductor,
Inc.
MStar Semiconductor
UK Ltd.
Software and customer
development
100% - 3
IStar Technology Ltd. IStar (HK) Technology
Ltd.
General investing and
sales
100% - 3
MStar Co. Ltd. MStar Software R&D
(Shenzhen), Ltd.
Software and customer
development
100% - 3
Digimoc Holdings
Limited
Bubbly Bay Holdings
Limited
General investing 100% - 3
1. For the purpose of reorganization, MediaTek Investment Corp. was dissolved due to the merger with MStar
Semiconductor Pte. Ltd. in April 2014. MStar Semiconductor Pte. Ltd. was renamed MediaTek Investment
Singapore Pte. Ltd. The 100% ownership of Gaintech Co. Limited, which was previously owned by
MediaTek Investment Corp., was therefore assumed by MediaTek Investment Singapore Pte. Ltd.
2. For the purpose of reorganization, Ralink Technology Corp. was dissolved due to the merger with MTK in
April 2014. MTK assumed 100% shares of T-Rich Technology (Cayman) Corp. and 11% shares of
MediaTek USA Inc. which were previously owned by Ralink Technology Corp. Afterward, MTK
transferred all shares of MediaTek USA Inc. to MTK Wireless Limited (UK) in April 2014.
3. MTK acquired de facto control over MStar Semiconductor, Inc. (Cayman) (�MStar�) after obtaining
relevant domestic and foreign regulators approvals in January 2014. MStar and its subsidiaries were
included in the consolidation entities thereafter. In February 2014, MTK acquired the remaining 52%
ownership of MStar by issuing new shares and paying cash. After that, MStar was delisted and dissolved.
Moreover, two of its subsidiaries Cheng Du All Fresh Food Co., Ltd. and MStar India Private Limited have
been dissolved in March and August 2014, respectively.
4. For the purpose of reorganization, MediaTek Investment Corp. carved out MediaTek Capital Corp. and
transferred all its shares to Hsu-Ta Investment Corp. in January 2014.
5. MediaTek Investment Singapore Pte. Ltd. and Hsu-Ta Investment Corp. jointly established MediaTek Bangalore
Private Limited in May 2014.
MediaTek Inc. | 2014 Annual Report F-22
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
6. For the purpose of reorganization, MediaTek Wireless LLC (Dubai) has been liquidated and returned its
capital in September 2014.
7. For the purpose of reorganization, MTK Wireless Limited (UK) acquired 100% shares of MeidaTek Sweden
AB, 100% shares of MediaTek Denmark Aps and 89% shares of MediaTek USA Inc. from Gaintech Co.
Limited in March, 2014. Moreover, MTK Wireless Limited (UK) acquired 11% shares of MediaTek USA
Inc. from MTK in April 2014.
8. For the purpose of reorganization, Ralink Technology Corporation (USA) was dissolved due to the merger
with MediaTek USA Inc. in July 2014.
9. EcoNet (HK) Limited established EcoNet (Suzhou) Limited in April 2014.
10. MTK Wireless Limited (UK) established MediaTek Wireless Finland Oy in October 2014.
11. The 100% ownership of MStar Semiconductor, Inc., which was previously owend by MStar Semiconductor
B.V., was transferred to MTK in November 2014.
12. The 100% ownership of MStar Chen Si Electronics Technology (Shanghai) Co., Ltd., which was previously
owned by MStar Software R&D (Shenzhen), Ltd., was transferred to MediaTek China Limited in November
2014.
The financial statements of all of consolidated subsidiaries listed above had been audited byauditors.
Foreign currency transactionsThe Company�s consolidated financial statements are presented in NT$, which is also the parentcompany�s functional currency. Each entity in the Company determines its functional currencyupon its primary economic environment and items included in the financial statements of eachentity are measured using that functional currency.
Transactions in foreign currencies are initially recorded by the Company�s entities at theirrespective functional currency rates prevailing at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are retranslated at the functional currency closingrate of exchange ruling at the reporting date. Non-monetary items measured at fair value in aforeign currency are translated using the exchange rates at the date when the fair value isdetermined. Non-monetary items that are measured at historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initial transactions.
All exchange differences arising on the settlement of monetary items or on translating monetaryitems are taken to profit or loss in the period in which they arise except for the following:A. Exchange differences arising from foreign currency borrowings for an acquisition of a
qualifying asset to the extent that they are regarded as an adjustment to interest costs areincluded in the borrowing costs that are eligible for capitalization.
MediaTek Inc. | 2014 Annual Report F-23
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. Foreign currency items within the scope of IAS 39 �Financial Instruments: Recognition andMeasurement� are accounted for based on the accounting policy for financial instruments.
C. Exchange differences arising on a monetary item that forms part of a reporting entity�s netinvestment in a foreign operation is recognized initially in other comprehensive income andreclassified from equity to profit or loss on disposal of the net investment.
When a gain or loss on a non-monetary item is recognized in other comprehensive income, anyexchange component of that gain or loss is recognized in other comprehensive income. When again or loss on a non-monetary item is recognized in profit or loss, any exchange component ofthat gain or loss is recognized in profit or loss.
Translation of financial statements in foreign currencyThe assets and liabilities of foreign operations are translated into New Taiwan Dollars at theclosing rate of exchange prevailing at the reporting date and their income and expenses aretranslated at an average rate for the period. The exchange differences arising on the translationare recognized in other comprehensive income. On the disposal of a foreign operation, thecumulative amount of the exchange differences relating to that foreign operation, recognized inother comprehensive income and accumulated in the separate component of equity, is reclassifiedfrom equity to profit or loss when the gain or loss on disposal is recognized. On the partialdisposal of foreign operations that result in a loss of control, loss of significant influence or jointcontrol but retain partial equity is considering as disposal.
On the partial disposal of a subsidiary that includes a foreign operation that does not result in aloss of control, the proportionate share of the cumulative amount of the exchange differencesrecognized in other comprehensive income is re-attributed to the non-controlling interests in thatforeign operation. In partial disposal of an associate or jointly controlled entity that includes aforeign operation that does not result in a loss of significant influence or joint control, only theproportionate share of the cumulative amount of the exchange differences recognized in othercomprehensive income is reclassified to profit or loss.
Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilitiesarising on the acquisition of a foreign operation are treated as assets and liabilities of the foreignoperation and expressed in its functional currency.
MediaTek Inc. | 2014 Annual Report F-24
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Current and non-current distinctionAn asset is classified as current when:A. The Company expects to realize the asset, or intends to sell or consume it, in its normal
operating cycleB. The Company holds the asset primarily for the purpose of tradingC. The Company expects to realize the asset within twelve months after the reporting periodD. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or
used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:A. The Company expects to settle the liability in its normal operating cycleB. The Company holds the liability primarily for the purpose of tradingC. The liability is due to be settled within twelve months after the reporting periodD. The Company does not have an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period. Terms of a liability that could, at the option ofthe counterparty, result in its settlement by the issue of equity instruments do not affect itsclassification.
All other liabilities are classified as non-current.
Cash and cash equivalentsCash and cash equivalents comprises cash on hand, demand deposits and short-term, highlyliquid investments that are readily convertible to known amounts of cash and which are subject toan insignificant risk of changes in value.
Financial instrumentsFinancial assets and financial liabilities are recognized when the Company becomes a party to thecontractual provisions of the instrument.
Financial assets and financial liabilities within the scope of IAS 39 �Financial Instruments:Recognition and Measurement� are recognized initially at fair value plus or minus, in the case ofinvestments not at fair value through profit or loss, directly attributable transaction costs.
A. Financial assetsAll regular way purchases or sales of financial assets are recognized and derecognized on atrade date basis.
MediaTek Inc. | 2014 Annual Report F-25
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Financial assets of the Company are classified as financial assets at fair value through profitor loss, held-to-maturity investments, available-for-sale financial assets and loans andreceivables. The Company determines the classification of its financial assets at initialrecognition.
a. Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for tradingand financial assets designated upon initial recognition at fair value through profit or loss.Financial assets at fair value through profit or loss are measured at fair value with changesin fair value recognized in profit or loss. Dividends or interests on financial assets at fairvalue through profit or loss are recognized in profit or loss (including those received duringthe period of initial investment).
A financial asset is classified as held for trading if:(a) it is acquired or incurred principally for the purpose of selling or repurchasing it in
short term;(b) on initial recognition it is part of a portfolio of identified financial instruments that are
managed together and for which there is evidence of a recent actual pattern ofshort-term profit-taking; or
(c) it is a derivative (except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument).
If a contract contains one or more embedded derivatives, the entire hybrid contract may bedesignated as a financial asset at fair value through profit or loss; or a financial asset maybe designated as at fair value through profit or loss when doing so results in more relevantinformation, because either:(a) it eliminates or significantly reduces a measurement or recognition inconsistency; or(b) a group of financial assets, financial liabilities or both is managed and its performance
is evaluated on a fair value basis, in accordance with a documented risk management orinvestment strategy, and information about the group is provided internally on thatbasis to the key management personnel.
If financial assets do not have quoted prices in an active market and their fair value cannotbe reliably measured, then they are classified as financial assets measured at cost onbalance sheet and carried at cost net of accumulated impairment losses, if any, as at thereporting date.
b. Available-for-sale financial assetsAvailable-for-sale investments are non-derivative financial assets that are designated asavailable-for-sale or those not classified as financial assets at fair value through profit orloss, held-to-maturity financial assets, or loans and receivables.
MediaTek Inc. | 2014 Annual Report F-26
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Foreign exchange gains and losses and interest calculated using the effective interestmethod relating to monetary available-for-sale financial assets, or dividends on anavailable-for-sale equity instrument, are recognized in profit or loss. Subsequentmeasurement of available-for-sale financial assets at fair value is recognized in equity untilthe investment is derecognized, at which time the cumulative gain or loss is recognized inprofit or loss.
If equity instrument investments do not have quoted prices in an active market and theirfair value cannot be reliably measured, then they are classified as financial assets measuredat cost on balance sheet and carried at cost net of accumulated impairment losses, if any, asat the reporting date.
c. Held-to-maturity financial assetsNon-derivative financial assets with fixed or determinable payments and fixed maturitiesare classified as held-to-maturity when the Company has the positive intention and abilityto hold it to maturity, other than those that are designated as available-for-sale, classified asfinancial assets at fair value through profit or loss, or meet the definition of loans andreceivables.
After initial measurement held-to-maturity financial assets are measured at amortized costusing the effective interest method, less impairment. Amortized cost is calculated by takinginto account any discount or premium on acquisition and fee or transaction costs. Theeffective interest method amortization is recognized in profit or loss.
d. Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market other than those that the Company uponinitial recognition designates as available for sale, classified as at fair value through profitor loss, or those for which the holder may not recover substantially all of its initialinvestment.
Loans and receivables are separately presented on the balance sheet as receivables or bondinvestments for which no active market exists. After initial measurement, such financialassets are subsequently measured at amortized cost using the effective interest rate method,less impairment. Amortized cost is calculated by taking into account any discount orpremium on acquisition and fee or transaction costs. The effective interest methodamortization is recognized in profit or loss.
MediaTek Inc. | 2014 Annual Report F-27
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
e. Impairment of financial assetsThe Company assesses at each reporting date whether there is any objective evidence thatan individual or a group of financial asset other than the financial assets at fair valuethrough profit or loss is impaired. An individual or a group of financial asset is deemed tobe impaired if, and only if, there is objective evidence of impairment as a result of one ormore loss events that has occurred after the initial recognition of the asset and that lossevent has an impact on the estimated future cash flows of the financial asset. The carryingamount of the financial asset is reduced through the use of an allowance account and theamount of the loss is recognized in profit or loss.
A significant or prolonged decline in the fair value of an available-for-sale equityinstrument below its cost is considered a loss event.
Other loss events include:(a) significant financial difficulty of the issuer or obligor; or(b) a breach of contract, such as a default or delinquency in interest or principal payments;
or(c) it becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or(d) the disappearance of an active market for that financial asset because of financial
difficulties.
For held-to-maturity financial assets and loans and receivables measured at amortized cost,if there is objective evidence that an impairment loss has been incurred, the amount of theloss is measured as the difference between the assets carrying amount and the present valueof estimated future cash flows. The present value of the estimated future cash flows isdiscounted at the financial assets original effective interest rate. Interest income is accruedbased on the reduced carrying amount of the asset, using the rate of interest used todiscount the future cash flows for the purpose of measuring the impairment loss.Receivables together with the associated allowance are written off when there is norealistic prospect of future recovery. If, in a subsequent year, the amount of the estimatedimpairment loss increases or decreases because of an event occurring after the impairmentwas recognized, the previously recognized impairment loss is increased or reduced byadjusting the allowance account. If a future write-off is later recovered, the recovery iscredited to profit or loss.
In the case of equity instruments classified as available-for-sale, where there is evidence ofimpairment, the cumulative loss - measured as the difference between the acquisition costand the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss - is removed from other comprehensive income and recognizedin profit or loss. Impairment losses on equity investments are not reversed through profit orloss; increases in their fair value after impairment are recognized directly in othercomprehensive income.
MediaTek Inc. | 2014 Annual Report F-28
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
In the case of debt instruments classified as available-for-sale, the amount recorded forimpairment is the cumulative loss measured as the difference between the amortized costand the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss. Future interest income continues to be accrued based on thereduced carrying amount of the asset, using the rate of interest used to discount the futurecash flows for the purpose of measuring the impairment loss. The interest income isrecognized in profit or loss. If, in a subsequent year, the fair value of a debt instrumentincreases and the increase can be objectively related to an event occurring after theimpairment loss was recognized in profit or loss, the impairment loss is reversed throughprofit or loss.
f. Derecognition of financial assetsA financial asset is derecognized when:(a) The rights to receive cash flows from the asset have expired(b) The Company has transferred the asset and substantially all the risks and rewards of the
asset have been transferred(c) The Company has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the difference between the carryingamount and the consideration received or receivable including any cumulative gain or lossthat had been recognized in other comprehensive income, is recognized in profit or loss.
B. Financial liabilities and equitya. Classification between liabilities or equity
The Company classifies the instrument issued as a financial liability or an equityinstrument in accordance with the substance of the contractual arrangement and thedefinitions of a financial liability, and an equity instrument.
b. Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of anentity after deducting all of its liabilities. The transaction costs of an equity transaction areaccounted for as a deduction from equity to the extent they are incremental costs directlyattributable to the equity transaction that otherwise would have been avoided.
c. Financial liabilitiesFinancial liabilities within the scope of IAS 39 �Financial Instruments: Recognition andMeasurement� are classified as financial liabilities at fair value through profit or loss orfinancial liabilities measured at amortized cost upon initial recognition.
MediaTek Inc. | 2014 Annual Report F-29
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(a) Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss include financial liabilities heldfor trading and financial liabilities designated upon initial recognition as at fair valuethrough profit or loss. Gains or losses on the subsequent measurement of liabilities heldfor trading including interest paid are recognized in profit or loss.
A financial liability is classified as held for trading if:i. it is acquired or incurred principally for the purpose of selling or repurchasing it in
short term;ii. on initial recognition it is part of a portfolio of identified financial instruments that
are managed together and for which there is evidence of a recent actual pattern ofshort-term profit-taking; or
iii. it is a derivative (except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument).
If a contract contains one or more embedded derivatives, the entire hybrid contract maybe designated as a financial liability at fair value through profit or loss; or a financialliability may be designated as at fair value through profit or loss when doing so resultsin more relevant information, because either:i. it eliminates or significantly reduces a measurement or recognition inconsistency;
orii. a group of financial assets, financial liabilities or both is managed and its
performance is evaluated on a fair value basis, in accordance with a documentedrisk management or investment strategy, and information about the group isprovided internally on that basis to the key management personnel.
If the financial liabilities at fair value through profit or loss do not have quoted pricesin an active market and their fair value cannot be reliably measured, then they areclassified as financial liabilities measured at cost on balance sheet and carried at cost asat the reporting date.
(b) Financial liabilities at amortized costFinancial liabilities measured at amortized cost include interest bearing loans andborrowings that are subsequently measured using the effective interest rate methodafter initial recognition. Gains and losses are recognized in profit or loss when theliabilities are derecognized as well as through the effective interest rate methodamortization process.
MediaTek Inc. | 2014 Annual Report F-30
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Amortized cost is calculated by taking into account any discount or premium onacquisition and fees or transaction costs.
(c) Derecognition of financial liabilitiesA financial liability is derecognized when the obligation under the liability isdischarged or cancelled or expires.
C. Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the balancesheet if, and only if, there is a currently enforceable legal right to offset the recognizedamounts and there is an intention to settle on a net basis, or to realize the assets and settle theliabilities simultaneously.
D. Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting dateis determined by reference to quoted market prices, without any deduction for transactioncosts.
For financial instruments not traded in an active market, the fair value is determined usingappropriate valuation techniques. Such techniques may include using recent arm�s lengthmarket transactions; reference to the current fair value of another instrument that issubstantially the same; a discounted cash flow analysis or other valuation models.
Derivative financial instrumentThe Company uses derivative financial instruments to hedge its foreign currency risks andinterest rate risks. A derivative is classified in the balance sheet as financial assets or liabilities atfair value through profit or loss (held for trading) except for derivatives that are designatedeffective hedging instruments which are classified as derivative financial assets or liabilities forhedging.
Derivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently remeasured at fair value. Derivatives arecarried as financial assets when the fair value is positive and as financial liabilities when the fairvalue is negative. Any gains or losses arising from changes in the fair value of derivatives aretaken directly to profit or loss, except for the effective portion of cash flow hedges and hedges ofnet investments in foreign operations, which is recognized in equity.
MediaTek Inc. | 2014 Annual Report F-31
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded atfair value if their economic characteristics and risks are not closely related to those of the hostcontracts and the host contracts are not held for trading or designated at fair value though profitor loss. These embedded derivatives are measured at fair value with changes in fair valuerecognized in profit or loss.
InventoriesCosts incurred in bringing each inventory to its present location and condition. Raw materials arevalued at purchase cost. Finish goods and work in progress include cost of direct materials andrelated manufacturing overheads. Inventories are valued at lower of cost and net realizable valueitem by item. Net realizable value is the estimated selling price in the ordinary course of business,less estimated costs of completion and the estimated costs necessary to make the sale. Inventoriesthat were not sold or moved for further production were assessed allowance and set aside toreflect the potential loss from stock obsolescence.
Investments accounted for using the equity methodThe Company�s investment in its associate is accounted for using the equity method other thanthose that meet the criteria to be classified as held for sale. An associate is an entity over whichthe Company has significant influence.
Under the equity method, the investment in the associate is carried in the balance sheet at costand adjusted thereafter for the post-acquisition change in the Company�s share of net assets of theassociate. After the interest in the associate is reduced to zero, additional losses are provided for,and a liability is recognized, only to the extent that the Company has incurred legal orconstructive obligations or made payments on behalf of the associate. Unrealized gains and lossesresulting from transactions between the Company and the associate are eliminated to the extent ofthe Company�s related interest in the associate.
When changes in the net assets of an associate occur and not those that are recognized in profit orloss or other comprehensive income and do not affects the Company�s percentage of ownershipinterests in the associate, the Company recognizes such changes in equity based on its percentageof ownership interests. The resulting capital surplus recognized will be reclassified to profit orloss at the time of disposing the associate on a pro rata basis.
When the associate issues new stock, and the Company�s interest in an associate is reduced orincreased as the Company fails to acquire shares newly issued in the associate proportionately toits original ownership interest, the increase or decrease in the interest in the associate isrecognized in capital surplus and investments accounted for using the equity method. When theinterest in the associate is reduced, the cumulative amounts previously recognized in othercomprehensive income are reclassified to profit or loss or other appropriate items. Theaforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis whenthe Company disposes the associate.
MediaTek Inc. | 2014 Annual Report F-32
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The financial statements of the associate are prepared for the same reporting period as theCompany. Where necessary, adjustments are made to bring the accounting policies in line withthose of the Company.
The Company determines at each reporting date whether there is any objective evidence that theinvestment in the associate is impaired. If this is the case the Company calculates the amount ofimpairment as the difference between the recoverable amount of the associate and its carryingvalue and recognizes the amount in the �share of profit or loss of an associate� in the statement ofcomprehensive income.
Upon loss of significant influence over the associate, the Company measures and recognizes anyretaining investment at its fair value. Any difference between the carrying amount of theassociate upon loss of significant influence and the fair value of the retaining investment andproceeds from disposal is recognized in profit or loss.
Property, plant and equipmentProperty, plant and equipment is stated at cost, net of accumulated depreciation and accumulatedimpairment losses, if any. Such cost includes the cost of dismantling and removing the item andrestoring the site on which it is located and borrowing costs for construction in progress if therecognition criteria are met. Each part of an item of property, plant and equipment with a costthat is significant in relation to the total cost of the item is depreciated separately. Whensignificant parts of property, plant and equipment are required to be replaced in intervals, theCompany recognized such parts as individual assets with specific useful lives and depreciation,respectively. The carrying amount of those parts that are replaced is derecognized in accordancewith the derecognition provisions of IAS 16 �Property, plant and equipment�. When a majorinspection is performed, its cost is recognized in the carrying amount of the plant and equipmentas a replacement if the recognition criteria are satisfied. All other repair and maintenance costsare recognized in profit or loss as incurred.
Depreciation is calculated on a straight-line basis over the estimated economic lives of thefollowing assets:
Buildings and facilities 3~50 yearsMachinery and equipment 3~5 yearsComputer and telecommunication equipment 3~5 yearsTesting equipment 3~5 yearsMiscellaneous equipment 2~5 years
MediaTek Inc. | 2014 Annual Report F-33
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
An item of property, plant and equipment and any significant part initially recognized isderecognized upon disposal or when no future economic benefits are expected from its use ordisposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.
The assets� residual values, useful lives and methods of depreciation are reviewed at eachfinancial year end and adjusted prospectively, if appropriate, and are treated as changes inaccounting estimates.
LeasesA. The Company as a lessee
Operating lease payments are recognized as an expense on a straight-line basis over the leaseterm.
B. The Company as a lessorLeases in which the Company does not transfer substantially all the risks and benefits ofownership of the asset are classified as operating leases. Initial direct costs incurred innegotiating an operating lease are added to the carrying amount of the leased asset andrecognized over the lease term on the same basis as rental income.
Intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost ofintangible assets acquired in a business combination is its fair value as at the date of acquisition.Following initial recognition, intangible assets are carried at cost less any accumulatedamortization and accumulated impairment losses, if any. Internally generated intangible assets,excluding capitalized development costs, are not capitalized and expenditure is reflected in profitor loss for the year in which the expenditure is incurred.
Expenditures related to research activities as well as those expenditures not meeting the criteriafor capitalization are expensed when incurred. Expenditures related to development activitiesmeeting the criteria for capitalization are capitalized.
The Company�s intangible assets mainly include trademarks, patents, software, customerrelationship, IPs and others which are acquired from third parties or business combinations. Asummary of the amortization policies applied to the Company�s intangible assets is as follows:
Trademarks Patents SoftwareCustomer
relationship IPs and others2~6 years 2~7 years 2~5 years 7 years 2~7 years
Abovementioned intangible assets are amortized on a straight-line basis over the estimateduseful life.
MediaTek Inc. | 2014 Annual Report F-34
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company�s intangible assets with finite lives are amortized over the useful economic life andassessed for impairment whenever there is an indication that the intangible asset may be impaired.The amortization period and the amortization method for an intangible asset with a finite usefullife is reviewed at least at the end of each financial year. Changes in the expected useful life orthe expected pattern of consumption of future economic benefits embodied in the asset isaccounted for by changing the amortization period or method, as appropriate, and are treated aschanges in accounting estimates. Gains or losses arising from derecognition of an intangible assetare measured as the difference between the net disposal proceeds and the carrying amount of theasset and are recognized in profit or loss.
Impairment of non-financial assetsThe Company assesses at the end of each reporting period whether there is any indication that anasset in the scope of IAS 36 �Impairment of Assets� may be impaired. If any such indicationexists, or when annual impairment testing for an asset is required, the Company estimates theasset�s recoverable amount. An asset�s recoverable amount is the higher of an asset�s orcash-generating unit�s (�CGU�) fair value less costs to sell and its value in use and is determinedfor an individual asset, unless the asset does not generate cash inflows that are largelyindependent of those from other assets or groups of assets. Where the carrying amount of an assetor CGU exceeds its recoverable amount, the asset is considered impaired and is written down toits recoverable amount.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there isany indication that previously recognized impairment losses may no longer exist or may havedecreased. If such indication exists, the Company estimates the asset�s or cash-generating unit�srecoverable amount. A previously recognized impairment loss is reversed only if there has beenan increase in the estimated service potential of an asset which in turn increases the recoverableamount. However, the reversal is limited so that the carrying amount of the asset does not exceedits recoverable amount, nor exceed the carrying amount that would have been determined, net ofdepreciation, had no impairment loss been recognized for the asset in prior years.
A cash generating unit, or groups of cash-generating units, to which goodwill has been allocatedis tested for impairment annually at the same time, irrespective of whether there is any indicationof impairment. If an impairment loss is to be recognized, it is first allocated to reduce thecarrying amount of any goodwill allocated to the cash generating unit (group of units), then to theother assets of the unit (group of units) pro rata on the basis of the carrying amount of each assetin the unit (group of units). Impairment losses relating to goodwill cannot be reversed in futureperiods for any reason.
MediaTek Inc. | 2014 Annual Report F-35
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
An impairment loss of continuing operations or a reversal of such impairment loss is recognizedin profit or loss.
Treasury sharesOwn equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. Any difference between the carrying amount and the consideration isrecognized in equity.
Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theCompany and the revenue can be reliably measured. Revenue is measured at the fair value of theconsideration received or receivable. The following specific recognition criteria must also be metbefore revenue is recognized:
A. Sale of goods Revenue from the sale of goods is recognized when all the following conditions have beensatisfied:a. the significant risks and rewards of ownership of the goods have passed to the buyer;b. neither continuing managerial involvement nor effective control over the goods sold have
been retained;c. the amount of revenue can be measured reliably;d. it is probable that the economic benefits associated with the transaction will flow to the
entity; ande. the costs incurred in respect of the transaction can be measured reliably.
The amount of revenue is measured at the fair value of the consideration received orreceivable taking into account the amount of any trade discounts and volume rebatesallowed by entity. The Company estimates sales returns and allowance based on historicalexperience and other known factors at the time of sale, which reduces the operatingrevenue.
B. Interest incomeFor all financial assets measured at amortized cost (including loans and receivables andheld-to-maturity financial assets) and available-for-sale financial assets, interest income isrecorded using the effective interest rate method and recognized in profit or loss.
C. DividendsRevenue is recognized when the Company�s right to receive the payment is established.
MediaTek Inc. | 2014 Annual Report F-36
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Post-employment benefitsAll regular employees of MTK and its domestic subsidiaries are entitled to a pension plan that ismanaged by an independently administered pension fund committee. Fund assets are depositedunder the committee�s name in the specific bank account and hence, not associated with MTKand its domestic subsidiaries. Therefore fund assets are not included in the Company�sconsolidated financial statements. Pension benefits for employees of the overseas subsidiariesand the branches are provided in accordance with the respective local regulations.
For the defined contribution plan, MTK and its domestic subsidiaries will make a monthlycontribution of no less than 6% of the monthly wages of the employees subject to the plan. TheCompany recognizes expenses for the defined contribution plan in the period in which thecontribution becomes due. Overseas subsidiaries make contribution to the plan based on therequirements of local regulations.
Post-employment benefit plan that is classified as a defined benefit plan uses the Projected UnitCredit Method to measure its obligations and costs based on actuarial assumptions. The Companyrecognizes all actuarial gains and losses in the period in which they occur in other comprehensiveincome. Actuarial gains and losses recognized in other comprehensive income are recognizedimmediately in retained earnings. Pension cost for an interim period is calculated on ayear-to-date basis by using the actuarially determined pension cost rate at the end of the priorfinancial year, adjusted and disclosed for significant market fluctuations since that time and forsignificant curtailments, settlements, or other significant one-off events.
Share-based payment transactionsThe cost of equity-settled transactions between the Company and its subsidiaries is recognizedbased on the fair value of the equity instruments granted. The fair value of the equity instrumentsis determined by using an appropriate pricing model.
The cost of equity-settled transactions is recognized, together with a corresponding increase inother capital reserves in equity, over the period in which the performance and/or serviceconditions are fulfilled. The cumulative expense recognized for equity-settled transactions at eachreporting date until the vesting date reflects the extent to which the vesting period has expiredand the Company�s best estimate of the number of equity instruments that will ultimately vest.The income statement expense or credit for a period represents the movement in cumulativeexpense recognized as at the beginning and end of that period.
MediaTek Inc. | 2014 Annual Report F-37
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
No expense is recognized for awards that do not ultimately vest, except for equity-settledtransactions where vesting is conditional upon a market or non-vesting condition, which aretreated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the minimum expenserecognized is the expense as if the terms had not been modified, if the original terms of the awardare met. An additional expense is recognized for any modification that increases the total fairvalue of the share-based payment transaction, or is otherwise beneficial to the employee asmeasured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation,and any expense not yet recognized for the award is recognized immediately. This includes anyaward where non-vesting conditions within the control of either the entity or the employee arenot met. However, if a new award is substituted for the cancelled award, and designated as areplacement award on the date that it is granted, the cancelled and new awards are treated as ifthey were a modification of the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in thecomputation of diluted earnings per share.
Income taxesIncome tax expense (income) is the aggregate amount included in the determination of profit orloss for the period in respect of current tax and deferred tax.
A. Current income taxCurrent income tax assets and liabilities for the current and prior periods are measured at theamount expected to be recovered from or paid to the taxation authorities, using the tax ratesand tax laws that have been enacted or substantively enacted by the end of the reportingperiod. Current income tax relating to items recognized in other comprehensive income ordirectly in equity is recognized in other comprehensive income or equity and not in profit orloss.
The 10% income tax for undistributed earnings is recognized as income tax expense in thesubsequent year when the distribution proposal is approved by the shareholders� meeting.
B. Deferred taxDeferred tax is provided on temporary differences at the reporting date between the tax basesof assets and liabilities and their carrying amounts for financial reporting purposes.
MediaTek Inc. | 2014 Annual Report F-38
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Deferred tax liabilities are recognized for all taxable temporary differences, except:a. Where the deferred tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and, at the time of thetransaction, affects neither the accounting profit nor taxable profit or loss.
b. In respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will notreverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward ofunused tax credits and unused tax losses, to the extent that it is probable that taxable profitwill be available against which the deductible temporary differences, and the carry forward ofunused tax credits and unused tax losses can be utilized, except:a. Where the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting profit nor taxable profit orloss.
b. In respect of deductible temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, deferred tax assets are recognized only to theextent that it is probable that the temporary differences will reverse in the foreseeablefuture and taxable profit will be available against which the temporary differences can beutilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply inthe year when the asset is realized or the liability is settled, based on tax rates and tax lawsthat have been enacted or substantively enacted at the reporting date. The measurement ofdeferred tax assets and deferred tax liabilities reflects the tax consequences that would followfrom the manner in which the Company expects, at the end of the reporting period, to recoveror settle the carrying amount of its assets and liabilities.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit orloss. Deferred tax items are recognized in correlation to the underlying transaction either inother comprehensive income or directly in equity. Deferred tax assets are reassessed at eachreporting date and are recognized accordingly.
MediaTek Inc. | 2014 Annual Report F-39
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists toset off current income tax assets against current income tax liabilities and the deferred taxesrelate to the same taxable entity and the same taxation authority.
Interim period income tax expense is estimated using the tax rate that would be applicable toexpected total annual earnings, that is, calculated by the pre-tax income of the interim periodmultiply by the estimated average annual effective income tax rate.
Business combinations and goodwillBusiness combinations are accounted for using the acquisition method. The considerationtransferred, the identifiable assets acquired and liabilities assumed are measured at acquisitiondate fair value. For each business combination, the acquirer measures any non-controlling interestin the acquiree either at fair value or at the non-controlling interest�s proportionate share of theacquiree�s identifiable net assets. Acquisition-related costs are accounted for as expenses in theperiods in which the costs are incurred and are classified under administrative expenses.
When the Company acquires a business, it assesses the assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at the acquisition date. This includes the separation ofembedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer�spreviously held equity interest in the acquiree is remeasured to fair value at the acquisition datethrough profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognized at theacquisition-date fair value. Subsequent changes to the fair value of the contingent considerationwhich is deemed to be an asset or liability, will be recognized in accordance with IAS 39�Financial Instruments: Recognition and Measurement� either in profit or loss or as a change toother comprehensive income. However, if the contingent consideration is classified as equity, itshould not be remeasured until it is finally settled within equity.
Goodwill is initially measured as the amount of the excess of the aggregate of the considerationtransferred and the non-controlling interest over the net fair value of the identifiable assetsacquired and the liabilities assumed. If this aggregate is lower than the fair value of the net assetsacquired, the difference is recognized in profit or loss.
MediaTek Inc. | 2014 Annual Report F-40
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.Goodwill acquired in a business combination is, from the acquisition date, allocated to each ofthe Company�s cash-generating units that are expected to benefit from the combination,irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Eachunit or group of units to which the goodwill is so allocated represents the lowest level within theCompany at which the goodwill is monitored for internal management purpose and is not largerthan an operating segment before aggregation.
5. Significant Accounting Judgments, Estimates and AssumptionsThe preparation of the Company�s consolidated financial statements require management tomake judgments, estimates and assumptions that affect the reported amounts of revenues,expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of thereporting period. The judgments and estimates made by the Company are based on historicalexperience and other related factors and continuously being evaluated and adjusted. Please referto below description:
Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that may cause a material adjustment to the carrying amounts of assets andliabilities within the next financial year are discussed below.
A. Fair value of financial instrumentsWhere the fair value of financial assets and financial liabilities recorded in the balance sheetcannot be derived from active markets, they are determined using valuation techniquesincluding the income approach (for example the discounted cash flows model) or marketapproach. Changes in assumptions about these factors could affect the reported fair value ofthe financial instruments. Please refer to Note 12 for more details.
B. Valuation of inventoryInventories are stated at the lower of cost or net realizable value, and the Company usesjudgment and estimate to determine the net realizable value of inventory at the end of eachreporting period.
Due to the rapid technological changes, the Company estimates the net realizable value ofinventory for obsolescence and unmarketable items at the end of reporting period and thenwrites down the cost of inventories to net realizable value. The net realizable value of theinventory is mainly determined based on assumptions of future demand within a specific timehorizon.
MediaTek Inc. | 2014 Annual Report F-41
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
C. Income taxUncertainties exist with respect to the interpretation of complex tax regulations and theamount and timing of future taxable income. Given the wide range of international businessrelationships and the long-term nature and complexity of existing contractual agreements,differences arising between the actual results and the assumptions made, or future changes tosuch assumptions, could cause future adjustments to tax income and expense already recorded.The Company establishes provisions, based on reasonable estimates, for possibleconsequences of audits by the tax authorities of the respective countries in which it operates.The amount of such provisions is based on various factors, such as experience of previous taxaudits and differing interpretations of tax regulations by the taxable entity and the responsibletax authority. Such differences of interpretation may arise on a wide variety of issuesdepending on the conditions prevailing in the respective company's domicile.
Deferred tax assets are recognized for all carryforward of unused tax losses and unused taxcredits and deductible temporary differences to the extent that it is probable that taxable profitwill be available or there are sufficient taxable temporary differences against which theunused tax losses, unused tax credits or deductible temporary differences can be utilized. Theamount of deferred tax assets determined to be recognized is based upon the likely timing andthe level of future taxable profits and taxable temporary differences together with future taxplanning strategies.
D. Revenue recognition - sales returns and discountsThe Company estimates sales returns and discounts based on historical experience and otherknown factors at the time of sale, which reduces the sales. The management periodicallyreviews the adequacy of the estimation used.
6. Contents of Significant Accounts(1) Cash and cash equivalents
December 31, 2014
December 31, 2013
Cash on hand and petty cash $ 2,525 $ 1,102Checking and savings accounts 29,446,795 13,315,702Time deposits 163,348,186 119,680,922Total $ 192,797,506 $ 132,997,726
Time deposits include deposits whose maturities are under twelve months and are readilyconvertible to known amounts of cash with values subject to an insignificant risk of changes.
Cash and cash equivalents were not pledged.
MediaTek Inc. | 2014 Annual Report F-42
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(2) Financial assets and financial liabilities at fair value through profit or loss
Financial assets designated upon initial recognition at fair value through profit or loss:
December 31, 2014
December 31, 2013
CurrentExchange rate-linked deposits $ 2,385,563 $ 721,039Interest rate-linked deposits 599,766 562,835Credit-linked deposits 295,272 319,603Index-linked deposits 255,626 297,942Convertible bonds - 221,777Subtotal 3,536,227 2,123,196
NoncurrentCredit-linked deposits 1,396,856 823,058Exchange rate-linked deposits 1,677,514 -Index-linked deposits 903,224 -Convertible bonds 63,199 94,583Bonds- Reverse Repo - 289,332Interest rate-linked deposits - 271,734Subtotal 4,040,793 1,478,707
Total $ 7,577,020 $ 3,601,903
Financial assets and financial liabilities held for trading:
December 31, 2014
December 31, 2013
Current assetsForward exchange contracts $ 1,933 $ 8,894Stocks 9,057 -Total $ 10,990 $ 8,894
Current liabilitiesForward exchange contracts $ 50,393 $ 26,017
Financial assets at fair value through profit or loss were not pledged.
MediaTek Inc. | 2014 Annual Report F-43
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(3)Available-for-sale financial assetsDecember 31,
2014December 31,
2013Current
Stocks $ 5,308,419 $ 1,746,775Funds 1,967,791 1,570,378Bonds 271,022 86,391Depositary receipts 28,010 22,577Subtotal 7,575,242 3,426,121
NoncurrentFunds 3,347,137 2,838,444Bonds 1,546,954 1,648,910Subtotal 4,894,091 4,487,354
Total $ 12,469,333 $ 7,913,475
Available-for-sale financial assets were not pledged.
(4) Financial assets measured at costDecember 31,
2014December 31,
2013Available-for-sale financial assets-noncurrent
Capital $ 2,509,126 $ 1,156,489Non-publicly traded stocks 1,273,258 905,074
Total $ 3,782,384 $ 2,061,563
Financial assets measured at cost were not pledged.
(5) Held-to-maturity financial assetsDecember 31,
2014December 31,
2013Current
Bonds $ 288,378 $ 549,573
NoncurrentBonds 127,787 341,937
Total $ 416,165 $ 891,510
Held-to-maturity financial assets were not pledged.
MediaTek Inc. | 2014 Annual Report F-44
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(6) Bond investments for which no active market existsDecember 31,
2014December 31,
2013Current
Bonds $ 1,074,391 $ -
Time deposits 11,755 113,678
Subtotal 1,086,146 113,678
Noncurrent
Time deposits 946 364
Total $ 1,087,092 $ 114,042
Please refer to Note 8 for more details on bond investments for which no active marketexists under pledge.
(7) Trade receivablesDecember 31,
2014December 31,
2013Trade receivables $ 18,369,294 $ 14,706,067Less: allowance for doubtful debts (162,112) (84,875)Less: allowance for sales returns and discounts (5,654,783) (6,993,601)Total $ 12,552,399 $ 7,627,591
Trade receivables were not pledged.
Trade receivables are generally on 45-60 day terms. The movements in the provision forimpairment of trade receivables are as follows (please refer to Note 12 for credit riskdisclosure):
Individuallyimpaired
Collectivelyimpaired Total
As of January 1, 2014 $ - $ 84,875 $ 84,875Charge for the current period - 26,806 26,806Effect of acquisition of subsidiaries - 50,000 50,000Exchange differences - 431 431As of December 31, 2014 $ - $ 162,112 $ 162,112
MediaTek Inc. | 2014 Annual Report F-45
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Individuallyimpaired
Collectivelyimpaired Total
As of January 1, 2013 $ - $ 162,859 $ 162,859Reversal for the current period - (79,110) (79,110)Exchange differences - 1,126 1,126As of December 31, 2013 $ - $ 84,875 $ 84,875
Aging analysis of trade receivables that were past due as of the end of the reporting periodbut not impaired is as follows:
Past due but not impaired
As ofNeither past due
nor impaired 1 to 90 daysMore than
91 days TotalDecember 31, 2014 $ 11,820,401 $ 731,998 $ - $ 12,552,399December 31, 2013 $ 7,383,181 $ 243,386 $ 1,024 $ 7,627,591
The Company entered into several factoring agreements without recourse with financialinstitutions. According to those agreements, the Company does not take the risk ofuncollectible trade receivables, but only the risk of loss due to commercial disputes. TheCompany did not provide any collateral, and the factoring agreements met the criteria offinancial asset derecognition. The Company derecognized related trade receivables afterdeducting the estimated value of commercial disputes. The Company has not withdrawncash entitled by the factoring agreements from banks as of December 31, 2014 and 2013.Receivables from banks due to factoring agreement were NT$2,062,053 thousand, andNT$2,697,718 thousand, respectively.
As of December 31, 2014 and 2013, trade receivables derecognized were as follows:
A. As of December 31, 2014:
The Factor(Transferee)
Interestrate
Trade receivablesderecognized
(US$�000)
Cashwithdrawn(US$�000)
Unutilized(US$�000)
Credit line(US$�000)
Taishin International Bank - $ 46,440 $ - $ 46,440 $ 117,490BNP Paribas - 18,049 - 18,049 105,000HSBC - 340 - 340 800TC Bank - 183 - 183 16,500Total $ 65,012 $ - $ 65,012 $ 239,790
MediaTek Inc. | 2014 Annual Report F-46
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. As of December 31, 2013:
The Factor(Transferee)
Interestrate
Trade receivablesderecognized
(US$�000)
Cashwithdrawn(US$�000)
Unutilized(US$�000)
Credit line(US$�000)
Taishin International Bank - $ 55,529 $ - $ 55,529 $ 154,860BNP Paribas - 22,887 - 22,887 100,000HSBC - 294 - 294 800TC Bank - 11,364 - 11,364 13,500
Total $ 90,074 $ - $ 90,074 $ 269,160
(8) InventoriesDecember 31,
2014December 31,
2013Raw materials $ 1,354,891 $ 4,787Work in progress 15,838,703 7,320,888Finished goods 13,297,586 5,268,422Total 30,491,180 12,594,097Less: allowance for inventory valuation losses (8,149,844) (3,247,305)Net amount $ 22,341,336 $ 9,346,792
For the years ended December 31, 2014 and 2013, the cost of inventories recognized inexpenses amounted to NT$109,194,295 thousand and NT$76,250,370 thousand, includingthe write-down of inventories of NT$3,772,317 thousand and NT$1,271,330 thousand forthe years ended December 31, 2014 and 2013.
No inventories were pledged.
MediaTek Inc. | 2014 Annual Report F-47
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(9) Investments accounted for using the equity methodA. The following table lists the investments accounted for using the equity method of the
Company:December 31, 2014 December 31, 2013
InvesteesCarryingamount
Percentage ofownership (%)
Carryingamount
Percentage ofownership (%)
MStar Semiconductor, Inc.(Cayman) $ - - $ 58,192,878 48
Airoha Technology Corp. 513,685 28 284,779 32Shenzhen Huiding Technology
Co., Ltd. 1,055,423 24 704,232 24
Alpha Imaging Technology Corp. 175,767 15 135,913 15
Others 409,738 - 351,959 -
Total $ 2,154,613 $ 59,669,761
The carrying amount of investments in the associates for which there were publishedprice quotations amounted to NT$175,767 thousand, and NT$58,328,791 thousand, as ofDecember 31, 2014 and 2013, respectively. The fair values of these investments wereNT$129,269 thousand, and NT$88,354,325 thousand, as of December 31, 2014 and 2013,respectively.
The share of profit of these associates accounted for using the equity method amounted toNT$983,941 thousand and NT$2,150,963 thousand for the years ended December 31,2014 and 2013, respectively. The share of other comprehensive income of theseassociates accounted for using the equity method amounted to NT$(22,549) thousand andNT$1,554,911 thousand for the years ended December 31, 2014 and 2013, respectively.
The Company serves as a director of the board of directors of Alpha Imaging TechnologyCorp. and participates in its policy-setting processes. Therefore, the Company hassignificant influence over Alpha Imaging Technology Corp. even its ownership is lowerthan 20%.
In 2012, MTK totally acquired 254,115,685 shares (48% of MStar�s outstanding shares)of MStar through a tender offer. The price of the tender offer was 1 MStar share inexchange for 0.794 share of MTK�s common stock plus NT$1 in cash. MTK aggregatelyissued 201,767,854 new shares and paid NT$254,116 thousand in cash for this tenderoffer. In January 2014, MTK obtained de facto control over MStar. Therefore MStar wasincluded in the consolidation entities. Please refer to Note 6. (24) for more details.
MediaTek Inc. | 2014 Annual Report F-48
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
No investment in the associates was pledged.
B. The following table summarizes financial information of the Company�s investments inthe associates:
December 31, 2014 December 31, 2013Total assets $ 9,056,416 $ 49,504,796Total liabilities $ 1,613,190 $ 11,080,916
For the years ended December 31 2014 2013
Net Sales $ 8,922,357 $ 40,025,789Net Income $ 2,353,463 $ 5,543,109
MediaTek Inc. | 2014 Annual Report F-49
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sfer
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530,
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-31
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ange
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ces
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65,3
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433,
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4$
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8$
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9,79
4$
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2$
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fJan
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1,20
13$
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3,86
9$
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7$
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$2,
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$3,
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$1,
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$2,
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3$
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9$
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8,98
7$
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$2,
287,
104
$3,
251,
188
$1,
192,
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$1,
011,
252
$18
,217
,475
MediaTek Inc. | 2014 Annual Report F-50
Engl
ish
Tran
slat
ion
ofFi
nanc
ialS
tate
men
tsO
rigin
ally
Issu
edin
Chi
nese
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MediaTek Inc. | 2014 Annual Report F-51
Engl
ish
Tran
slat
ion
ofFi
nanc
ialS
tate
men
tsO
rigin
ally
Issu
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Chi
nese
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MediaTek Inc. | 2014 Annual Report F-52
Engl
ish
Tran
slat
ion
ofFi
nanc
ialS
tate
men
tsO
rigin
ally
Issu
edin
Chi
nese
ME
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3$
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$15
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MediaTek Inc. | 2014 Annual Report F-53
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(12)Impairment testing of goodwillThe Company�s goodwill allocated to each of cash-generating units or groups ofcash-generating units is expected to benefit from synergies of the business combination. Keyassumptions used in impairment testing are as follows:
The recoverable amount of the cash-generating unit is determined based on the value-in-usecalculated using cash flow projections discounted by the pre-tax discount rate from financialbudgets approved by management covering a five-year period. The projected cash flowsreflect the change in demand for products and services. As a result of the analysis, theCompany did not identify any impairment for the goodwill of NT$54,136,415 thousand.
Key assumptions used in value-in-use calculationsThe calculation of value-in-use for the cash-generating unit is most sensitive to the followingassumptions:(a) Gross margin(b) Discount rates(c) Growth rates of sales of budget period
Gross margins - Gross margins are based on the gross margins of latest fiscal year and futuretrend of the market.
Discount rates - Discount rates reflect the current market assessment of the risks specific toeach cash generating unit (including the time value of money and the risks specific to theasset for which the future cash flow estimates have not been adjusted). The discount rate wasestimated based on the weighted average cost of capital (WACC) for the Company, takinginto account the particular situations of the Company and its operating segments. TheWACC includes both the cost of liabilities and cost of equity. The cost of equity is derivedfrom the expected returns of the Company�s investors on capital, where the cost of liabilitiesis measured by the interest bearing loans that the Company has obligation to settle.
Growth rates of sales estimates - The growth rate of sales were estimated by historicalexperience. The long-term average growth rate the Company predicted was adjusted byconsidering the product life cycle and the macroeconomic environment.
Sensitivity to changes in assumptionsWith regard to the assessment of value-in-use of the cash-generating unit, the Companybelieves that no reasonably possible change in any of the above key assumptions wouldcause the carrying value of the unit to materially exceed its recoverable amount.
MediaTek Inc. | 2014 Annual Report F-54
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(13)Short-term borrowingsDecember 31, 2014 December 31, 2013
Unsecured bank loans $ 46,160,593 $ 29,051,500Interest rates 0.60~1.83% 0.75~2.55%Unused lines of credits $ 42,748,541 $ 5,988,350
(14)Post-employment benefitsDefined contribution planMTK and its domestic subsidiaries adopt a defined contribution plan in accordance with theLabor Pension Act of the R.O.C. MTK and its domestic subsidiaries have made monthlycontributions of 6% of each individual employee�s salaries or wages to employees� pensionaccounts. Subsidiaries located in the People�s Republic of China will contribute socialwelfare benefits based on a certain percentage of employees� salaries or wages to theemployees� individual pension accounts. Pension benefits for employees of foreignsubsidiaries are provided in accordance with the local regulations.
Pension expenses under the defined contribution plan for the years ended December 31, 2014and 2013 were NT$1,004,244 thousand and NT$702,388 thousand, respectively.
Defined benefits planMTK and its domestic subsidiaries adopt a defined benefit plan in accordance with theLabor Standards Act of the R.O.C. The pension benefits are disbursed based on the units ofservice years and the average salaries in the last month of the service year. Two units peryear are awarded for the first 15 years of services while one unit per year is awarded afterthe completion of the 15th year. The total units shall not exceed 45 units. Under the LaborStandards Act, MTK and its domestic subsidiaries contribute an amount equivalent to 2% ofthe employees� total salaries and wages on a monthly basis to the pension fund deposited atthe Bank of Taiwan in the name of the administered pension fund committee.
The summarization of defined benefits plan reflected in profit or loss is as follows:
For the years ended December 31 2014 2013
Current service cost $ 2,871 $ 4,764Interest cost 14,325 9,413Expected return on plan assets (2,191) (1,270)Past service cost - -Total $ 15,005 $ 12,907
MediaTek Inc. | 2014 Annual Report F-55
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The cumulative amount of actuarial losses recognized in other comprehensive income is asfollows:
For the years ended December 31 2014 2013
As of January 1 $ 145,128 $ 103,084Actuarial losses for the period 328,043 42,044As of December 31 $ 473,171 $ 145,128
Reconciliation of liability (asset) of the defined benefit plan is as follows:December 31,
2014December 31,
2013Defined benefit obligation at present value $ 1,062,300 $ 675,485Plan assets at fair value (121,304) (69,452)Accrued pension liabilities recognized on the
consolidated balance sheets $ 940,996 $ 606,033
Changes in present value of the defined benefit obligation are as follows:For the years ended December 31
2014 2013Defined benefit obligation as of January 1 $ 675,485 $ 627,560Current service cost 2,871 4,764Interest cost 14,325 9,413Effect of acquistion of subsidiaries 40,913 -Actuarial losses 328,706 41,680Benefits paid - (7,932)Defined benefit obligation as of December 31 $ 1,062,300 $ 675,485
Changes in fair value of plan assets are as follows:For the years ended December 31
2014 2013Fair value of plan assets as of January 1 $ 69,452 $ 71,806Expected return on plan assets 2,191 1,270Contributions by employer 4,000 2,022Effect of acquistion of subsidiaries 44,998 -Benefits paid - (7,932)Actuarial losses 663 (364)Others - 2,650Fair value of plan assets as of December 31 $ 121,304 $ 69,452
MediaTek Inc. | 2014 Annual Report F-56
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company expects to contribute NT$24,308 thousand to its defined benefit plan for theyear ended December 31, 2015.
The major categories of plan assets as a percentage of the fair value of total plan assets areas follows:
Pension plan (%) as of
December 31,2014
December 31,2013
Cash 21.10% 26.96%
Equity instruments 49.69% 44.77%
Debt instruments 26.38% 27.48%
Others 2.83% 0.79%
The Company�s actual return on plan assets was NT$2,854 thousand and NT$906 thousandfor the years ended December 31, 2014 and 2013.
Employee pension fund is deposited under a trust administered by the Bank of Taiwan. Theoverall expected rate of return on assets is determined based on historical trend and analyst�sexpectation on the asset�s return in its market over the obligation period. Furthermore, theutilization of the fund by the labor pension fund supervisory committee and the fact that theminimum earnings are guaranteed to be no less than the earnings attainable from theamounts accrued from two-year time deposits with the interest rates offered by local banksare also taken into consideration in determining the expected rate of return on assets.
The principal assumptions used in determining the Company�s defined benefit plan areshown below:
December 31,2014
December 31,2013
Discount rate 2.00~2.25% 2.00%
Expected rate of return on plan assets 1.75~2.25% 2.00%
Expected rate of salary increases 3.00~4.50% 3.00~3.40%
MediaTek Inc. | 2014 Annual Report F-57
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
A 0.5 percentage point change in discount rate on defined benefit obligation:
For the years ended December 31 2014 2013
0.5%increase in
discount rate
0.5%decrease in
discount rate
0.5%increase in
discount rate
0.5%decrease in
discount rateEffect on the aggregate
service cost in next period $ (258) $ 291 $ (189) $ 214Effect on the defined benefit
obligation $ (111,030) $ 125,568 $ (73,400) $ 83,325
The Company has elected to disclose amounts required by paragraph 120A(p) of IAS 19prospectively from the date of transition to TIFRS. The related account balances of definedbenefit plan for the years ended 2014, 2013 and 2012 are as followings:
For the years ended December 31
2014 2013 2012Defined benefit obligation at present
value as of December 31 $ 1,062,300 $ 675,485 $ 627,560Plan assets at fair value as of
December 31 (121,304) (69,452) (71,806)Deficit in plan as of December 31 $ 940,996 $ 606,033 $ 555,754Experience adjustments on plan
liabilities $ (46,681) $ (23,200) $ (21,232)Experience adjustments on plan assets $ 663 $ (364) $ (606)
(15)EquityA. Share capital
MTK�s authorized capital as of December 31, 2014 and 2013 was NT$20,000,000thousand, divided into 2,000,000,000 shares (including 20,000,000 shares reserved forexercise of employee stock options at each period), each at a par value of NT$10. MTK�sissued capital was NT$15,714,455 thousand and NT$13,494,667 thousand, divided into1,571,445,544 shares and 1,349,466,701 shares, as of December 31, 2014 and 2013,respectively. Each share has one voting right and a right to receive dividends.
In February 2014, MTK acquired the remaining 52% ownership of MStar by issuing221,123,877 shares, each at a par value of NT$10. MTK has successfully obtainedrelevant regulators approvals.
MediaTek Inc. | 2014 Annual Report F-58
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
MTK totally issued 654,373 new shares and 333,580 new shares for the years endedDecember 31, 2014 and 2013, respectively, at par value of NT$10 for the employee stockoptions exercised. Furthermore, 46,700 shares (NT$467 thousand in the amount), and247,293 shares (NT$2,473 thousand in the amount) were not yet registered and thereforewere classified as capital collected in advance as of December 31, 2014 and 2013,respectively.
B. Capital surplusDecember 31,
2014December 31,
2013Additional paid-in capital $ 85,824,767 $ 66,585,671Treasury share transactions 1,198,502 1,081,591The differences between the fair value of the
consideration paid or received fromacquiring or disposing subsidiaries andthe carrying amounts of the subsidiaries 149,965 149,965
Changes in ownership interests insubsidiaries 215,280 12,129
Donated assets 1,261 1,260From share of changes in net assets of
associates 68,650 51,144Employee stock options 465,777 401,842Others 123,712 191,308Total $ 88,047,914 $ 68,474,910
According to the Company Law, the capital surplus shall not be used except for offset thedeficit of the company. When a company incurs no loss, it may distribute the capitalsurplus generated from the excess of the issuance price over the par value of share capital(including the shares issued for mergers and the surplus from treasury shares transactions)and donations. The distribution could be made in cash or in the form of dividend shares toits shareholders in proportion to the number of shares being held by each of them.
C. Treasury sharesAs of December 31, 2014 and 2013, MTK�s shares held by the subsidiary, MediaTekCapital Corp., were NT$55,970 thousand, and the number of MTK�s shares held were7,794,085 shares. These shares held by MediaTek Capital Corp. were acquired for thepurpose of financing before the amendment of the Company Act on November 12, 2001.
As of December 31, 2014 and 2013, MTK did not hold any other treasury shares.
MediaTek Inc. | 2014 Annual Report F-59
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
D. Retained earnings and dividend policyAccording to the MTK�s Articles of Incorporation, current year�s earnings, if any, shallbe distributed in the following order:a. Income tax obligation;b. Offsetting accumulated deficits, if any;c. Legal reserve at 10% of net income after tax; where such legal reserve amounts to the
total authorized capital, this provision shall not apply.d. Special reserve in compliance with the Company Law or the Securities and Exchange
Law;e. Remuneration for directors and supervisors to a maximum of 0.5% of the remaining
current year�s earnings after deducting item (a) through (d). Remuneration fordirectors and supervisors� services is limited to cash payments.
f. The remaining after all above appropriations and distributions, combining withundistributed earnings from prior years, shall be fully for shareholders� dividends andemployees� bonuses and may be retained or distributed proportionally. The portion ofemployees� bonuses may not be less than 1% of total earnings resolved to distributefor shareholders� dividends and employees� bonuses. Employees� bonuses may bedistributed in the form of shares or cash, or a combination of both. Employees ofMTK�s subsidiaries, meeting certain requirements determined by the board ofdirectors, are also eligible for the employees� stock bonuses.
Shareholders� dividends may be distributed in the form of shares or cash, or acombination of both, and cash dividends to be distributed may not be less than 10% oftotal dividends to be distributed.
According to the Company Law, MTK needs to set aside amount to legal reserve unlesswhere such legal reserve amounts to the total authorized capital. The legal reserve can beused to offset the deficit of MTK. When MTK incurs no loss, it may distribute the portionof legal reserve which exceeds 25% of the paid-in capital by issuing new shares or bycash in proportion to the number of shares being held by each of the shareholders.
Pursuant to existing regulations, MTK is required to set aside additional special reserveequivalent to the net debit balance of the other components of shareholders� equity. Forany subsequent reversal of other net deductions from shareholders� equity, the amountreversed may be distributed.
MediaTek Inc. | 2014 Annual Report F-60
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Following the adoption of TIFRS, the FSC on April 6, 2012 issued Order No.Financial-Supervisory-Securities-Corporate-1010012865, which sets out the followingprovisions for compliance:
On a public company's first-time adoption of the TIFRS, for any unrealized revaluationgains and cumulative translation adjustments (gains) recorded to shareholders� equity thatthe company elects to transfer to retained earnings by application of the exemption underIFRS 1, the company shall set aside an equal amount of special reserve. Following acompany�s adoption of the TIFRS for the preparation of its financial reports, whendistributing distributable earnings, it shall set aside to special reserve based on thedifference between the amount already set aside and the total debit balance of othershareholders� equity. For any subsequent reversal of other net deductions fromshareholders� equity, the amount reversed may be distributed.
As of January 1, 2013, special reserve set aside for the first-time adoption of TIFRSamounted to nil.
During the years ended December 31, 2014 and 2013, the amounts of the employees�bonuses were estimated to be NT$579,974 thousand and NT$1,593,476 thousand,respectively. During the years ended December 31, 2014 and 2013, the amounts ofremunerations to directors and supervisors were estimated to be NT$84,192 thousand andNT$56,784 thousand, respectively. The employees� bonuses were estimated based on aspecific rate of net income for the years ended December 31, 2014 and 2013 (excludingthe impact of employees� bonuses) while the remunerations to directors and supervisorswere estimated based on MTK�s Articles of Incorporation. Estimated amount ofemployees� bonuses and remunerations paid to directors and supervisors were charged tocurrent income. If the resolution of shareholders� general meeting modifies the estimatessignificantly in the subsequent year, MTK shall recognize the change as an adjustment toincome of next year. If stock bonuses are resolved for distribution to employees, thenumber of shares distributed is determined by dividing the amount of bonuses by theclosing price (after considering the effect of cash and stock dividends) of shares on theday preceding the shareholders� meeting.
The appropriations of earnings for 2013 and 2012 were resolved by the board of directors�meeting on April 30, 2014 and May 10, 2013, while the appropriations of earnings for2013 and 2012 were resolved by general shareholders� meeting on June 12, 2014 andJune 21, 2013. The amounts resolved in the shareholders� general meeting wereconsistent with those determined by the board of directors.
MediaTek Inc. | 2014 Annual Report F-61
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Appropriation of earnings Dividend per share (NT$)
2013 2012 2013 2012
Legal reserve $ 2,751,505 $ 1,568,753 - -Special reserve (reversal) (4,176,676) 2,862,113 - -Cash dividends-common stock 23,565,323 674,690 $ 15.00 $ 0.50Directors� and supervisors�
remunerations 57,880 28,141 - -Employees� bonuses-cash 1,593,476 895,875 - -
Total $ 23,791,508 $ 6,029,572
On May 10, 2013, the board of directors resolved a cash distribution of NT$9.0 per share(NT$12,144,424 thousand in the amount), among which NT$8.5 per share(NT$11,469,734 thousand in the amount) is from capital surplus while the remaining isfrom earnings. The cash distribution was approved by the shareholders� meeting on June21, 2013.
The difference between the resolution of the shareholders� general meeting and theestimated expense of the directors� and supervisors� remuneration and the employees�bonuses for 2013 are as follows:
Appropriations
The amountresolved by the
board of directorsmeeting
Expenseestimated Difference
Differencereasons and
the accountingtreatment
Employees� bonuses-cash $ 1,593,476 $ 1,593,476 $ - -Directors� and supervisors�
remunerations $ 57,880 $ 56,784 $ 1,096 (Note)Note: The difference, which was resulted from different calculation basis between the original accrual and
the amount actually paid, was adjusted in the profit or loss in 2014.
The information about the appropriations of earnings resolved by the board of directors�meeting and shareholders� meeting is available at the Market Observation Post Systemwebsite.
MediaTek Inc. | 2014 Annual Report F-62
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
E. Other equityExchange differences
resulting from translating
the financial statements
of foreign operations
Unrealized gains
from
available-for-sale
financial assets Total
As of January 1, 2014 $ (2,404,641) $ 1,508,892 $ (895,749)
Exchange differences resulting from
translating the financial statements
of foreign operations 6,645,482 - 6,645,482
Unrealized gains from
available-for-sale financial assets - 841,778 841,778
Unrealized gains reclassified to profit
or loss from available-for-sale
financial assets - 37,151 37,151
Share of other comprehensive income
of associates accounted for using
equity method (22,549) - (22,549)
As of December 31, 2014 $ 4,218,292 $ 2,387,821 $ 6,606,113
Exchange differences
resulting from translating
the financial statements
of foreign operations
Unrealized gains
from
available-for-sale
financial assets Total
As of January 1, 2013 $ (5,762,485) $ 579,111 $ (5,183,374)
Exchange differences resulting from
translating the financial statements
of foreign operations 1,802,933 - 1,802,933
Unrealized gains from
available-for-sale financial assets - 782,101 782,101
Unrealized gains reclassified to profit
or loss from available-for-sale
financial assets - 147,680 147,680
Share of other comprehensive income
of associates accounted for using
equity method 1,554,911 - 1,554,911
As of December 31, 2013 $ (2,404,641) $ 1,508,892 $ (895,749)
MediaTek Inc. | 2014 Annual Report F-63
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
F. Non-controlling interestsFor the years ended December 31
2014 2013Beginning balance $ 38,193 $ 34,209Gain (loss) attributable to non-controlling interests 1,181 (30,402)Other comprehensive income, attributable to
non-controlling interests, net of tax:Exchange differences resulting from translating the
financial statements of foreign operations39,171 8,244
Changes in ownership interests in subsidiaries 359,054 26,142Ending balance $ 437,599 $ 38,193
(16)Share-based payment plansCertain employees of the Company are entitled to share-based payment as part of theirremunerations. Services are provided by the employees in return for the equity instrumentsgranted. These plans are accounted for as equity-settled share-based payment transactions.
In December 2007, July 2009, May 2010, August 2011, August 2012 and August 2013,MTK was authorized by the Financial Supervisory Commission, Executive Yuan, to issueemployee stock options of 5,000,000 units, 3,000,000 units, 3,500,000 units, 3,500,000 units,3,500,000 units and 3,500,000 units, respectively, each unit eligible to subscribe for onecommon share. The options may be granted to qualified employees of MTK or any of itsdomestic or foreign subsidiaries, in which MTK�s shareholding with voting rights, directlyor indirectly, is more than fifty percent. The options are valid for ten years and exercisable atcertain percentage subsequent to the second anniversary of the granted date. Under the termsof the plan, the options are granted at an exercise price equal to the closing price of MTK�scommon shares listed on the TWSE on the grant date.
Detail information relevant to the share-based payment plan is disclosed as follows:
Date of grantTotal number ofoptions granted
Total number ofoptions outstanding
Shares available foroption holders
Exercise price(NT$) (Note)
2008.03.31 1,134,119 299,326 299,326 $ 358.02008.08.28 1,640,285 490,164 490,164 344.52009.08.18 1,382,630 584,549 584,549 429.52010.08.27 1,605,757 728,645 728,645 404.82010.11.04 65,839 14,634 14,634 377.02011.08.24 2,109,871 1,272,697 652,384 277.42012.08.14 1,346,795 1,059,040 284,845 286.82013.08.22 1,436,343 1,305,943 - 368.0
MediaTek Inc. | 2014 Annual Report F-64
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Note: The exercise prices have been adjusted to reflect the change of outstanding shares (i.e. the share issued
for cash, the appropriations of earnings, issuance of new shares in connection with merger, or issuance
of new shares to acquire shares of other companies) in accordance with the plan.
The compensation cost was recognized under the fair value method and the Black-ScholesOption Pricing model was used to estimate the fair value of options granted. Assumptionsused in calculating the fair value are disclosed as follows:
Employee Stock OptionExpected dividend yield (%) 2.43%~6.63%Expected volatility (%) 32.9%~50.06%Risk free interest rate (%) 0.93%~2.53%Expected life (Years) 6.5 years
The expected life of the share options is based on historical data and current expectationsand is not necessarily indicative of exercise patterns that may occur. The expected volatilityreflects the assumption that the historical volatility over a period similar to the life of theoptions is indicative of future trends, which may also not necessarily be the actual outcome.
The following table contains further details on the aforementioned share-based paymentplan:
For the years ended December 31
2014 2013
Employee Stock Option
Options
(Unit)
Weighted-average
Exercise Price per
Share (NT$)
Options
(Unit)
Weighted-average
Exercise Price per
Share (NT$)
Outstanding at beginning of year 6,641,191 $ 341.3 6,045,493 $ 332.7
Granted - - 1,436,343 368.0
Exercised (654,373) 340.8 (285,885) 314.6
Forfeited (Expired) (231,820) 335.6 (554,760) 289.1
Outstanding at end of year 5,754,998 341.4 6,641,191 341.3
Exercisable at end of year 3,054,547 2,599,022
Weighted-average fair value of
options granted during the year
(in NT$) $ - $ 96.5
The weighted average share price at the date of exercise of those options were NT$472.3and NT$397.3 for the years ended December 31, 2014 and 2013.
MediaTek Inc. | 2014 Annual Report F-65
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The information on the outstanding share-based payment plan as of December 31, 2014 and
2013 is as follows:
December 31, 2014 December 31, 2013
Outstanding stock options Outstanding stock options
Date of grant
Range of Exercise
Price (NT$)
Weighted-
average
Expected
Remaining
Years
Weighted-
average
Exercise Price
per Share
(NT$)
Weighted-
average
Expected
Remaining
Years
Weighted-
average
Exercise Price
per Share
(NT$)
2007.12.19 $ 344.5~358.0 0.10 $ 349.6 1.00 $ 349.8
2009.07.27 429.5 1.13 429.5 2.13 431.0
2010.05.10 377.0~404.8 2.17 404.3 3.17 404.3
2011.08.09 277.4 3.17 277.4 4.17 277.4
2012.08.09 286.8 4.13 286.8 5.13 286.8
2013.08.09 368.0 5.17 368.0 6.17 368.0
MTK issued new shares to exchange 100% shares of Ralink Technology Corp. on October 1,2011. According to the share-swap agreement, MTK also issued its own stock options toreplace Ralink�s stock options. The original terms of Ralink�s options remain except for thechanges: a) the underlying shares have been changed to MTK�s shares; and b) the number ofshares each option can subscribe for has been changed according to the share exchange ratiostated in the share-swap agreement.
The employee stock options issued by MTK to replace Ralink�s share-based payment allexpired in 2013.
MediaTek Inc. | 2014 Annual Report F-66
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Details of Ralink�s share-based payment plan to be replaced are shown below:
Date of grant
Totalnumber of
optionsgranted
Total numberof options
outstandingon the shares
exchangedate
Total number ofoptions outstandingtranslated by shareexchange ratio on
the shares exchangedate
Totalnumber of
optionsoutstanding
Sharesavailablefor option
holders
Exerciseprice
(NT$)(Note)
2006.06.30 91,000 1,575 499 - - $14.32006.09.30 599,500 9,763 3,092 - - 14.32006.12.31 78,000 3,936 1,247 - - 14.32007.03.31 273,000 11,967 3,791 - - 15.72007.06.30 150,000 32,879 10,416 - - 15.72007.09.30 560,000 149,568 47,368 - - 15.72007.12.30 17,000 944 299 - - 15.72007.12.31 1,000,000 277,490 87,895 - - 16.7
Note: The exercise prices have been adjusted to reflect the change of outstanding shares (i.e. the share issued
for cash or the appropriations of earnings) in accordance with the plan.
The Black-Scholes Option Pricing model was used to estimate the fair value of optionsgranted to replace Ralink�s options. Assumptions used in calculating the fair value aredisclosed as follows:
Employee Stock Option
Expected dividend yield (%) 6.57%Expected volatility (%) 39.5%Risk free interest rate (%) 0.71%~0.86%Expected life (Years) 0.75 year
The aforementioned expected option life is based on historical data of period for previouslygranted options and current expectations are not necessarily indicative of exercise patternsthat may occur. The expected volatility reflects the assumption that the historical volatilityover a period similar to the life of the options is indicative of future trends, which may alsonot necessarily be the actual outcome.
MediaTek Inc. | 2014 Annual Report F-67
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The weighted-average exercise price of the options granted to replace Ralink�s options isdisclosed as follows:
For the year ended December 31, 2013
Employee Stock OptionOptions(Unit)
Weighted-averageExercise Price per
Share (NT$)Outstanding at beginning of year 52,483 $16.4Granted - -Exercised (47,695) 16.4Forfeited (Expired) (4,788) 16.2Outstanding at end of year - -Exercisable at end of year -Weighted-average fair value of options
granted during the year (in NT$) $ -
The weighted average share price at the date of exercise of those options was NT$347.6 forthe year ended December 31, 2013.
The information on the outstanding share-based payment plan as of December 31, 2013 is asfollows:
As of December 31, 2013Outstanding stock options
Date of grantRange of Exercise
Price (NT$)
Weighted- averageExpected
Remaining Years
Weighted- averageExercise Price per Share
(NT$)2007.01.29 $15.7 - $15.72007.10.30 16.7 - 16.7
The expense recognized for employee services received for the years ended December 31,2014 and 2013, is shown in the following table:
For the years ended December 31 2014 2013
Total equity-settled transactions $ 63,935 $ 75,799
There have been no cancellations or modifications to any of the plans during the years endedDecember 31, 2014 and 2013.
MediaTek Inc. | 2014 Annual Report F-68
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(17)SalesFor the years ended December 31
2014 2013
Sale of goods $ 245,883,275 $ 156,364,494Other operating revenues 1,627,218 1,061,939Less: Sales returns and discounts (34,447,577) (21,370,479)
Net sales $ 213,062,916 $ 136,055,954
(18)Summary statement of employee benefits, depreciation and amortization expenses byfunction for the years ended December 31, 2014 and 2013:
For the years ended December 31
2014 2013
Operating
costs
Operating
expensesTotal
Operating
costs
Operating
expensesTotal
Employee benefits expense
Salaries $ 575,321 $ 29,414,231 $ 29,989,552 $ 194,538 $ 16,839,520 $ 17,034,058
Labor and health insurance $ 78,800 $ 1,210,960 $ 1,289,760 $ 17,371 $ 731,776 $ 749,147
Pension $ 13,179 $ 1,006,070 $ 1,019,249 $ 11,484 $ 703,811 $ 715,295
Others $ 10,254 $ 934,378 $ 944,632 $ 5,984 $ 701,033 $ 707,017
Depreciation $ 6,641 $ 1,306,000 $ 1,312,641 $ 2,791 $ 1,179,400 $ 1,182,191
Amortization $ 60 $ 1,453,098 $ 1,453,158 $ - $ 544,639 $ 544,639
(19) Other incomeFor the years ended December 31
2014 2013
Rental income $ 25,648 $ 9,812Interest income 3,125,381 1,755,482Dividend income 238,877 167,855Gain on reversal of bad debts - 79,110Others 93,429 390,368
Total $ 3,483,335 $ 2,402,627
MediaTek Inc. | 2014 Annual Report F-69
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(20) Other gains and losses
For the years ended December 31 2014 2013
Losses on disposal of property, plant andequipment $ (2,775) $ (3,137)
Gains (losses) on disposal of investmentsAvailable-for-sale financial assets 4,489 (49,780)Held-to-maturity financial assets 6,470 -Financial assets measured at cost 700,759 1,772Bond investments for which no active
market exists 505 -Investments accounted for using the equitymethod 216,730 -
Foreign exchange gains 601,683 545,463Impairment losses
Available-for-sale financial assets (41,640) (97,900)Financial assets measured at cost (221,732) (380,210)
Gain (loss) on financial assets at fair value throughprofit or loss 3,939 (39,529)
Losses on financial liabilities at fair value throughprofit or loss (50,393) (26,017)
Others (97,884) (54,334)Total $ 1,120,151 $ (103,672)
(21) Finance costsFor the years ended December 31
2014 2013Interest expenses on short-term borrowings $ 478,782 $ 146,816
(22) Income taxThe major components of income tax expense are as follows:
For the years ended December 31 2014 2013
Current income tax $ 7,554,706 $ 2,998,863Deferred tax income (1,782,259) (1,008,094)Others 178,435 71,403Income tax expense recognized in profit or loss $ 5,950,882 $ 2,062,172
MediaTek Inc. | 2014 Annual Report F-70
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
A reconciliation between tax expense and the product of accounting profit multiplied byapplicable tax rates is as follows:
For the years ended December 312014 2013
Accounting profit before tax from continuing operations $ 52,349,955 $ 29,546,822
Tax at the domestic rates applicable to profits in thecountry concerned
$ 11,025,467 $ 6,091,788
Tax effect of revenues exempt from taxation (3,467,060) (2,564,637)Tax effect of expenses not deductible for tax purposes (1,652,956) (1,368,278)Investment tax credits (537,490) (1,058,197)Tax effect of deferred tax assets/liabilities 41,390 178,45710% surtax on undistributed retained earnings 537,490 1,058,197Others 4,041 (275,158)Total income tax expense recognized in profit or loss $ 5,950,882 $ 2,062,172
For the year ended December 31, 2014
Beginningbalance
Recognizedin profit or
loss
Recognized inother
comprehensiveincome
Chargeddirectly to
equityExchange
differencesEndingbalance
Temporary differencesUnrealized allowance for
inventory obsolescence $ 362,166 $ 384,411 $ - $ - $ - $ 746,577Allowance for sales returns
and discounts 783,242 464,883 - - - 1,248,125Amortization of difference
for tax purpose 182,348 (24,949) - - - 157,399Amortization of goodwill
difference for tax purpose (1,041,748) 422,508 - - - (619,240)Unused foreign tax losses 172,826 (60,483) - - - 112,343Unused tax credits 143,363 53,094 - - - 196,457Others 126,554 542,795 55,768 - - 725,117
Deferred tax income $ 1,782,259 $ 55,768 $ - $ -
Net deferred tax assets $ 728,751 $ 2,566,778
Reflected in balance sheet as
follows:Deferred tax assets $ 1,778,859 $ 3,196,429
Deferred tax liabilities $ (1,050,108) $ (629,651)
MediaTek Inc. | 2014 Annual Report F-71
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
For the year ended December 31, 2013
Beginningbalance
Recognizedin profit or
loss
Recognized inother
comprehensiveincome
Chargeddirectly to
equityExchange
differencesEndingbalance
Temporary differencesUnrealized allowance for
inventory obsolescence $ 36,514 $ 325,652 $ - $ - $ - $ 362,166Allowance for sales returns
and discounts 46,338 736,904 - - - 783,242Amortization of difference
for tax purpose 69,067 113,281 - - - 182,348Amortization of goodwill
difference for tax purpose (1,158,926) 117,178 - - - (1,041,748)Unused foreign tax losses 152,757 20,069 - - - 172,826Unused tax credits 490,160 (346,797) - - - 143,363Others 84,747 41,807 - - - 126,554
Deferred tax income $ 1,008,094 $ - $ - $ -
Net deferred taxassets (liabilities) $ (279,343) $ 728,751
Reflected in balance sheet as
follows:Deferred tax assets $ 915,791 $ 1,778,859
Deferred tax liabilities $ (1,195,134) $ (1,050,108)
Integrated income tax informationDecember 31,
2014December 31,
2013Balance of the imputation credit account $ 7,667,187 $ 1,892,716
The estimated and actual creditable ratios for 2014 and 2013 were 11.71% and 4.34%,respectively.
MTK�s earnings generated prior to December 31, 1997 have been fully appropriated.
MediaTek Inc. | 2014 Annual Report F-72
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The assessment of income tax returnsAs of December 31, 2014, the assessment of the income tax returns of MTK and itssubsidiaries are as follows:
The assessment ofincome tax returns
Notes
MTK Assessed and approved up to 2012 (Note 2)Subsidiary-Ralink Technology Corp. Assessed and approved up to 2012 (Note 1&2)Subsidiary-MStar Semiconductor Inc. Assessed and approved up to 2011Subsidiary-Light Up International Corp. Assessed and approved up to 2012
Note1: Ralink Technology Corp. was dissolved due to the merger with MTK in April 2014.
Note2: For the tax returns of 2012, 2011, 2010, 2009 and 2008 of MTK, and the tax return of 2012, 2011 and
2010 of subsidiary-Ralink Technology Corp., the tax authorities have assessed additional taxes. The
discrepancy between the Company�s tax return filing and the result of tax authority�s assessment was
mainly due to different interpretations by applying rules. Although the Company has vigorously filed
several administrative appeals to tax authorities and courts, the Company paid the amount in full.
(23)Earnings per shareBasic earnings per share is calculated by dividing net profit for the year attributable toordinary equity owners of the parent entity by the weighted average number of ordinaryshares outstanding during the year.
Diluted earnings per share is calculated by dividing the net profit attributable to ordinaryequity owners of the parent entity by the weighted average number of ordinary sharesoutstanding during the year plus the weighted average number of ordinary shares that wouldbe issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
For the years ended December 31
2014 2013
A. Basic earnings per share
Profit attributable to ordinary equity owners of the parent
(in thousand NT$) $ 46,397,892 $ 27,515,052
Weighted average number of ordinary shares outstanding
for basic earnings per share (share) 1,544,565,142 1,341,660,900
Basic earnings per share (NT$) $ 30.04 $ 20.51
MediaTek Inc. | 2014 Annual Report F-73
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
For the years ended December 31
2014 2013
B. Diluted earnings per share
Profit attributable to ordinary equity owners of the parent
(in thousand NT$) $ 46,397,892 $ 27,515,052
Weighted average number of ordinary shares outstanding
for basic earnings per share (share) 1,544,565,142 1,341,660,900
Effect of dilution:
Employee bonuses-stock (share) 2,695,764 4,851,460
Employee stock options (share) 1,637,031 652,161
Weighted average number of ordinary shares outstanding
after dilution (share) 1,548,897,937 1,347,164,521
Diluted earnings per share (NT$) $ 29.96 $ 20.42
There have been no other transactions involving ordinary shares or potential ordinary sharesbetween the reporting date and the date of completion of the financial statements.
(24)Business combinationsThe merger with MStarThe merger was approved by the Extraordinary Shareholders Meeting of MTK on October12, 2012. Based on the resolution of the Extraordinary Shareholders Meeting, MTK paid0.794 company shares and NT$1 in cash for each share of MStar.
The merger was approved by Ministry of Commerce of the People�s Republic of China(�MOFCOM�) on August 26, 2013, contingent upon the completion of a working planwhich should be reviewed by MOFCOM. On November 26, 2013, the working plan wasapproved by MOFCOM. In addition, the supplementary document of the working plan wasalso approved by MOFCOM in January 2014. MTK obtained de facto control over MStar onthe day (the acquisition day) that MTK�s and MStar�s board of directors approved to followthe working plan and its supplementary document which had been approved by MOFCOM.The original 48% interest of MStar acquired before the acquisition of de facto control wasremeasured at fair value and the difference was recognized as a gain.
MediaTek Inc. | 2014 Annual Report F-74
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Furthermore, MTK issued 221,123,877 new shares and paid NT$278,494 thousand in cashto acquire the remaining 52% MStar�s shares. The registration of MTK�s new share issuancewas completed. MStar was delisted from Taiwan Stock Exchange and dissolved on February1, 2014. The issuance of new shares to acquire the remaining 52% shares was recorded as anequity transaction.
According to MOFCOM�s conditional approval, following the delist of MStar, its mobilephone chips and wireless communication business can be integrated into MTK while TVchips and related business operation has to be maintained by MStar Semiconductor, Inc.(�MStar Taiwan�) for three years post merger. MStar Taiwan can be further integrated withMTK after the third anniversary, subject to condition removal. Synergy from the merger atthis stage will be primarily reflected in mobile phone chips and wireless communicationbusiness. Through the integration of research and development team and technologyresources, MTK can enhance its technology and product development capabilities. Inaddition, MTK will expand its global business operation and further strengthen the industryleading position to optimize shareholder value.
The Company has measured the non-controlling interest in MStar at the non-controllinginterest�s proportionate share of the acquiree�s identifiable net assets.
The fair values of the identifiable assets and liabilities of MStar as of the date of acquisitionwere:
Fair value recognized on theacquisition date (US$�000)
Cash and cash equivalents $ 1,098,762Current assets 279,016Funds and investments 9,172Property, plant and equipment 106,875Intangible assets-trademark, computer software, patent,
core techniques and customer relationship 180,645Other non-current assets 1,261
1,675,731
Current liabilities (303,105)Long-term borrowings (21,431)Other liabilities (794)
(325,330)Identifiable net assets $ 1,350,401
MediaTek Inc. | 2014 Annual Report F-75
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Amount (US$�000)Goodwill of MStar is as follows:The fair value of the equity interest in MStar held by
MTK $ 1,930,979Add: non-controlling interest 706,156Less: identifiable net assets at fair value (1,350,401)Goodwill $ 1,286,734
Cash flows on acquisition: Amount (US$�000)Net cash acquired by the subsidiary $ 1,098,762Transaction costs attributable to cash paid (9,168)Net cash flows on acquisition $ 1,089,594
The identifiable net assets recognized in the consolidated financial statements as of March31, 2014 and June 30, 2014 were based on a provisional assessment of fair value. TheCompany has completed the assessment in October 2014 and determined the fair value ofidentifiable net assets on the acquisition day to be US$1,350,401 thousand, which representsa decrease in value of US$9,702 thousand compared to that of the provisional assessment.The final assessment also decreased the values of intangible assets, non-controlling interestsand goodwill by US$9,702 thousand, US$16,280 thousand and US$6,578 thousand,respectively. The total amount of goodwill based on the final assessment is US$1,286,734thousand. In addition, the decrease in intangible assets also decreased the amortizationduring the three months and six months ended March 31, 2014 and June 30, 2014. However,the decrease in amortization is not material.
The goodwill of US$1,286,734 thousand comprises the value of expected synergies arisingfrom acquisition. The goodwill recognized is expected to be fully deductible for income taxpurposes.
From the acquisition date to December 31, 2014, MStar has contributed NT$35,524,045thousand of net sales and NT$5,473,066 thousand of net income to the Company.
If the combination had taken place at the beginning of the year, revenues and net income ofthe Company would have been NT$216,006,494 thousand and NT$46,633,940 thousand.
MediaTek Inc. | 2014 Annual Report F-76
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(25) Changes in parent�s ownership interests in subsidiariesChanges in ownership of subsidiariesLepower Technologies (Beijing), Inc., AutoChips Inc. and EcoNet (Caymen) Inc. issuednew shares in February, August and November 2014, respectively, and the Company did notpurchase new shares in proportionate to its original ownership interest. In addition, theCompany purchased additional 15.33% of voting shares of Lepower Limited in February2014 and its ownership rose up to 99.77%. Consequently, the ownership interest in thesecompanies changed but control over these companies remains. The difference between thefair value of purchased equity investments and the increase in the non-controlling interestwas NT$203,151 thousand which was recorded in equity.
Please refer to Note 6. (24) for more information about the acquisition of the remaining 52%stock of MStar in February 2014.
Lepower Limited, E-Vehicle Semiconductor Technology Co., Ltd. and RollTech TechnologyCo., Ltd. issued new shares in February, April and July 2013, respectively. The Company didnot purchase new shares in proportionate to its original ownership interest. Consequently, theownership interest in these companies changed but control over these companies remains.The difference between the fair value of purchased equity investments and the increase in thenon-controlling interest was NT$10,546 thousand and was recognized in equity.
7. Related Party Transactions(1) Significant transactions with related parties
A. SalesFor the years ended December 31
2014 2013Associates $ 3,577 $ -
For the years ended December 31, 2014 and 2013, repectively, the trade credit term forrelated parties and third-party customers were both 45 to 60 days. Third-party customersmay pay their accounts in advance.
B. IC testing, experimental services, and manufacturing technology servicesFor the years ended December 31
2014 2013Other related parties $ 4,879,016 $ 6,908,329
MediaTek Inc. | 2014 Annual Report F-77
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
C. Consign research and development expense and license expenseFor the years ended December 31
2014 2013Associates $ 200,000 $ -Other related parties 40,155 26,807Total $ 240,155 $ 26,807
D. PurchasesFor the years ended December 31
2014 2013Associates $ 9,834 $ -
E. Rental incomeFor the years ended December 31
2014 2013Associates $ 714 $ 500Other related parties 8,606 9,187Total $ 9,320 $ 9,687
NT$876 thousand was received from other related parties, which was accounted fordeposits received due to a lease of office space.
F. Other receivables from related partiesDecember 31,
2014December 31,
2013Associates $ 150 $ 60Other related parties - 340Total $ 150 $ 400
G. Trade payables to related partiesDecember 31,
2014December 31,
2013Other related parties $ 677,196 $ 2,082,028
H. Key management personnel compensationFor the years ended December 31
2014 2013Short-term employee benefits (Note) $ 709,494 $ 556,240Post-employment benefits 3,076 2,610Total $ 712,570 $ 558,850
MediaTek Inc. | 2014 Annual Report F-78
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Note: The Company estimated the management personnel compensation of short-term employee benefitsbased on the accrued bonuses and the actual proportion of earnings appropriation in the past.
8. Assets Pledged as CollateralThe following table lists assets of the Company pledged as security:
Carrying amount
Assets pledged for securityDecember 31,
2014December 31,
2013 Purpose of pledgeBond investments for which no
active market exists-current$ 7,067 $ 6,917 Land lease guarantee
Bond investments for which no active market exists-current
3,142 3,104 Customs clearance deposits
Bond investments for which no active market exists-current
- 102,000 Project performance deposits
Bond investments for which no active market exists-current
1,546 1,657 Credit guarantee
Bond investments for which no active market exists-noncurrent
820 243 Customs clearance deposits
Bond investments for which no active market exists-noncurrent
126 121 Lease execution deposits
Total $ 12,701 $ 114,042
9. Contingencies and Off Balance Sheet Commitments(1) Operating lease commitments-the Company as lessee
The Company has entered into commercial leases, and these leases have an average life ofthree to ten years with no renewal options included in the contracts. There are no restrictionsplaced upon the Company by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases are as follows:December 31,
2014December 31,
2013
Not later than one year $ 377,191 $ 374,715Later than one year but not later than five years 572,653 753,028Later than five years 124,576 181,444Total $ 1,074,420 $ 1,309,187
MediaTek Inc. | 2014 Annual Report F-79
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(2) Legal claim contingencyA. Azure Networks, LLC (�Azure�) and Tri-County Excelsior Foundation (�TCEF�) filed a
complaint in the United States District Court for the Eastern District of Taxes againstRalink and Ralink Technology Corporation (USA), along with other defendants in March2011, alleging infringement of United States Patent No. 7,756,129. On April 6, 2012,Azure and TCEF filed a complaint in the United States District Court for the EasternDistrict of Texas against MTK alleging infringement of the same patent referenced above.On May 30, 2013, the Court entered a judgment in favor of Ralink and other defendants,dismissing the earlier case subject to the plaintiffs� right to appeal. An appeal has beenfiled by plaintiffs on June 20, 2013. On November 6, 2014, the United States Court ofAppeals for the Federal Circuit vacated the lower court�s judgment and remanded thecase to the district court. The court dismissed the claims against Ralink pursuant to Azureand Ralink�s joint motion on February 10, 2015. On June 10, 2013, the Court entered ajudgment dismissing the latter case pursuant to the parties' joint stipulation.
Additionally, on January 13, 2015, Azure filed a complaint in the United States DistrictCourt for the Eastern District of Texas against MTK and subsidiary MediaTek USA Inc.alleging infringement of United States Patent Nos. 7,756,129, 8,582,570, 8,582,571,8,588,196, 8,588,231, 8,589,599, 8,675,590, 8,683,092 and 8,732,347 by MTK�swireless communications, tablet and mobile phone chips, and seeking damages. Theoperations of MTK and subsidiary MediaTek USA Inc. would not be materially affectedby this case.
B. Commonwealth Scientific and Industrial Research Organization filed a complaint in theUnited States District Court for the Eastern District of Texas against MTK andsubsidiaries MediaTek USA Inc., Ralink, and Ralink Technology Corporation (USA),along with other defendants on August 27, 2012 alleging infringement of United StatesPatent No. 5,487,069. The operations of MTK and subsidiary MediaTek USA Inc. wouldnot be materially affected by this case.
C. Palmchip Corporation (�Palmchip�) filed a complaint in the Superior Court of Californiain the County of Santa Clara against MTK and subsidiaries MediaTek USA Inc., Ralinkand Ralink Technology Corporation (USA) on October 19, 2012, asserting claims ofbreach of contract. The operations of MTK and subsidiary MediaTek USA Inc. would notbe materially affected by this case.
MediaTek Inc. | 2014 Annual Report F-80
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Palmchip filed a complaint in the United States District Court for the Central District ofCalifornia against MTK and subsidiaries MediaTek USA Inc., Ralink, and RalinkTechnology Corporation (USA) on August 30, 2013, alleging infringement of UnitedStates Patents Nos. 6,601,126, 6,769,046, and 7,124,376. The operations of MTK andsubsidiary MediaTek USA Inc. would not be materially affected by this case.
D. Optical Devices, LLC (�Optical Devices�) filed a complaint with the U.S. InternationalTrade Commission (the �Commission�) against MTK and subsidiary MediaTek USA Inc.on September 3, 2013 alleging infringement of United States Patent No. 8,416,651.Optical Devices alleged that MTK�s optical disc drive chips infringe its patent and soughtto prevent the accused products from being imported into the United States. TheCommission issued an Initial Determination on July 17, 2014 finding that OpticalDevices failed to meet the domestic industry requirement and terminating theinvestigation. On September 3, 2014, the Commission vacated the Initial Determinationand remanded the case for further proceedings. On October 21, 2014, the Commissionissued an Initial Determination to terminate the investigation on the ground that OpticalDevices� lack of standing. On December 4, 2014, the Commission partially vacated theInitial Determination and remanded a part of the case including the investigation againstMTK for further proceedings. The operations of MTK and subsidiary MediaTek USA Inc.would not be materially affected by this case.
Also on September 3, 2013, Optical Devices filed a complaint in the United StatesDistrict Court for the District of Delaware against MTK and subsidiary MediaTek USAInc., alleging that MTK�s optical disc drive chips infringe the above referenced patent.The operations of MTK and subsidiary MediaTek USA Inc. would not be materiallyaffected by this case.
E. Vantage Point Technology, Inc. filed a complaint in the United States District Court forthe Eastern District of Texas against MediaTek USA Inc. on November 21, 2013,alleging infringement of United States Patent Nos. 5,463,750 and 6,374,329. Theoperations of MTK and subsidiary MediaTek USA Inc. would not be materially affectedby this case.
MediaTek Inc. | 2014 Annual Report F-81
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
F. Bandspeed Inc. filed a complaint in the United States District Court for the WesternDistrict of Texas against MTK, subsidiary MediaTek USA Inc. and other defendants onMay 9, 2014, alleging infringement of United States Patent Nos. 7,027,418, 7,570,614,7,477,624, 7,903,608 and 8,542,643. On October 17, 2014, the court granted the partiesjoint stipulation to dismiss the claims against MTK, all other claims against other partiesincluding those against subsidiary MediaTek USA Inc. remain pending. On February 13,2015, the court granted Bandspeed�s motion for leave to file a First Amended Complaintto add United States Patent No. 8,873,500 to the case.The operations of MTK andsubsidiary MediaTek USA Inc. would not be materially affected by this case.
G. Adaptive Data LLC (�Adaptive Data�) filed a complaint in the United States DistrictCourt for the District of Delaware against subsidiary MediaTek USA Inc. on December31, 2014, alleging infringement of United States Patent Nos. 6,108,347 and 6,243,391 bythe Bluetooth chips of subsidiary MediaTek USA Inc. and seeking damages. This casehas been settled and Adaptive Data voluntarily dismissed the case on February 19, 2015.
H. Luciano F. Paone filed a complaint in the United States District Court for the EasternDistrict of New York against subsidiary MediaTek USA Inc. on February 9, 2015,alleging infringement of United States Patent No. 6,259,789. The operations of MTK andsubsidiary MediaTek USA Inc. would not be materially affected by this case.
I. Innovatio IP Ventures, LLC (�Innovatio�) filed a complaint in the United States DistrictCourt for the Northern District of Illinois against subsidiary MediaTek USA Inc. onMarch 16, 2015, alleging infringement of United States Patent Nos. 6,697,415, 5,844,893,5,740,366, 7,916,747, 6,665,536, 7,013,138, 7,107,052, 5,546,397, 7,710,907, 7,710,935,6,714,559, 7,457,646 and 6,374,311. The operations of MTK and subsidiary MediaTekUSA Inc. would not be materially affected by this case.
The Company will handle these cases carefully.
10. Losses due to Major DisastersNone
11. Significant Subsequent EventsNone
MediaTek Inc. | 2014 Annual Report F-82
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
12. Others(1) Financial instruments
A. Categories of financial instrumentsFinancial assets
December 31, 2014
December 31,2013
Financial assets at fair value through profit or loss:
Held for trading financial assets $ 10,990 $ 8,894Financial assets designated upon initial
recognition at fair value through profit or loss 7,577,020 3,601,903Subtotal 7,588,010 3,610,797
Available-for-sale financial assets 12,469,333 7,913,475Financial assets measured at cost 3,782,384 2,061,563Held-to-maturity financial assets 416,165 891,510Loans and receivables:
Cash and cash equivalents (excluding cash on hand and petty cash) 192,794,981 132,996,624
Bond investments for which no active marketexists 1,087,092 114,042
Trade receivables 13,552,399 7,627,591Other receivables 5,296,078 3,652,885Subtotal 211,730,550 144,391,142
Total $ 235,986,442 $ 158,868,487
Financial liabilitiesDecember 31,
2014December 31,
2013Financial liabilities at fair value through profit or loss:
Held for trading financial liabilities $ 50,393 $ 26,017Financial liabilities at amortized cost:
Short-term borrowings 46,160,593 29,051,500Trade payables (including related parties) 14,605,160 10,944,174Other payables 32,766,959 16,835,299Long-term payables (including current portion) 91,982 116,805
Subtotal 93,624,694 56,947,778Total $ 93,675,087 $ 56,973,795
MediaTek Inc. | 2014 Annual Report F-83
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. Fair values of financial instrumentsa. The methods and assumptions applied in determining the fair value of financial
instruments:The fair value of the financial assets and liabilities are included at the amount atwhich the instrument could be exchanged in a current transaction between willingparties, other than in a forced or liquidation sale. The following methods andassumptions were used to estimate the fair values:
(a)The carrying amount of cash and cash equivalents, trade receivables, otherreceivables, short-term borrowings, trade payables (including related parties),and other payables approximate their fair value due to their short maturities.
(b)For financial assets and liabilities traded in an active market with standard termsand conditions, their fair value is determined based on market quotation price(including listed equity securities and bonds) at the reporting date.
(c)The fair value of derivative financial instrument is based on market quotations.For unquoted derivatives that are not options, the fair value is determined basedon discounted cash flow analysis using interest rate yield curve for the contractperiod. Fair value of option-based derivative financial instruments is obtainedusing the option pricing model.
(d)The fair value of other financial assets and liabilities is determined usingdiscounted cash flow analysis, the interest rate and discount rate are selectedwith reference to those of similar financial instruments.
b. Fair value of financial instruments measured at amortized cost
Other than those listed in the table below, the carrying amount of the Company�sfinancial assets and liabilities measured at amortized cost approximate their fairvalue:
Carrying amount as ofDecember 31, 2014 December 31, 2013
Financial assetsHeld-to-maturity financial assets
Bonds $ 416,165 $ 891,510
MediaTek Inc. | 2014 Annual Report F-84
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Fair value as ofDecember 31, 2014 December 31, 2013
Financial assetsHeld-to-maturity financial assets
Bonds $ 410,093 $ 912,021
c. Assets measured at fair valueThe following table contains the fair value of financial instruments after initialrecognition and the details of the three levels of fair value hierarchy:
Level 1: Quoted (unadjusted) prices in active markets for identical assets orliabilities.
Level 2: Other techniques for which all inputs which have a significant effect on therecorded fair value are observable, either directly or indirectly.
Level 3: Techniques which use inputs which have a significant effect on therecorded fair value that are not based on observable market data.
As of December 31, 2014
Level 1 Level 2 Level 3 Total
Financial assets:
Financial assets at fair value
through profit or loss
Stocks $ 9,057 $ - $ - $ 9,057
Bonds - - 63,199 63,199
Derivative financial instruments - 1,933 - 1,933
Linked deposits - 5,821,693 1,692,128 7,513,821
Available-for-sale financial assets
Depositary receipts 28,010 - - 28,010
Stocks 5,308,419 - - 5,308,419
Bonds 1,601,108 - 216,868 1,817,976
Funds 4,844,578 - 470,350 5,314,928
Total $ 11,791,172 $ 5,823,626 $ 2,442,545 $ 20,057,343
Financial liabilitiesFinancial liabilities at fair value
through profit or lossDerivative financial instruments $ - $ 50,393 $ - $ 50,393
MediaTek Inc. | 2014 Annual Report F-85
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
As of December 31, 2013Level 1 Level 2 Level 3 Total
Financial assets:Financial assets at fair value
through profit or lossBonds $ 546,109 $ - $ 59,583 $ 605,692Derivative financial instruments - 8,894 - 8,894Linked deposits - 1,912,174 1,084,037 2,996,211
Available-for-sale financial assetsDepositary receipts 22,577 - - 22,577Stocks 1,746,775 - - 1,746,775Bonds 1,536,906 - 198,395 1,735,301Funds 4,408,822 - - 4,408,822
Total $ 8,261,189 $ 1,921,068 $ 1,342,015 $ 11,524,272
Financial liabilitiesFinancial liabilities at fair value
through profit or lossDerivative financial instruments $ - $ 26,017 $ - $ 26,017
For the years ended December 31, 2014 and 2013, there were no transfers between Level 1and Level 2.
Reconciliation for fair value measurements in Level 3 of the fair value hierarchy is asfollows:
Financial assets
at fair value
through profit or loss
Available-for-sale
financial assets
Bonds
Linked
deposits Bonds Funds Total
As of January 1, 2014 $ 59,583 $ 1,084,037 $ 198,395 $ - $ 1,342,015
Amount recognized in
profit or loss 3,616 39,074 - - 42,690
Amount recognized in OCI - - 18,473 - 18,473
Acquisitions - 1,177,176 - 864,013 2,041,189
Settlements - (608,159) - (393,663) (1,001,822)
As of December 31, 2014 $ 63,199 $ 1,692,128 $ 216,868 $ 470,350 $ 2,442,545
MediaTek Inc. | 2014 Annual Report F-86
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Financial assets
at fair value
through profit or loss
Available-for-sale
financial assets
Bonds
Linked
deposits Bonds Funds Total
As of January 1, 2013 $ - $ $317,597 $ 176,781 $ - $ 494,378
Amount recognized in
profit or loss (315) (4,986) - - (5,301)
Amount recognized in OCI - - 21,614 - 21,614
Acquisitions 59,898 1,483,150 - - 1,543,048
Settlements - (711,724) - - (711,724)
As of December 31, 2013 $ 59,583 $ 1,084,037 $ 198,395 $ - $ 1,342,015
Total profits or losses recognized for the years ended December 31, 2014 and 2013contained profits related to bonds, funds and linked deposits on hand as ofDecember 31, 2014 and 2013 in the amount of NT$38,684 thousand and NT$387thousand, respectively.
C. Derivative financial instrumentsThe Company�s derivative financial instruments held for trading were forwardexchange contracts. The related information is as follows:
The Company entered into forward exchange contracts to manage its exposure tofinancial risk, but these contracts were not designated as hedging instruments. Thetable below lists the information related to forward exchange contracts:
Forward exchangecontracts Currency
Contract amount(�000) Maturity
As of December 31, 2014 TWD to USD Sell USD105,000 February 2015As of December 31, 2014 CNY to USD Sell USD1,500 March 2015As of December 31, 2014 TWD to USD Sell USD75,000 January 2015As of December 31, 2013 TWD to USD Sell USD200,000 January 2014
The Company entered into forward foreign exchange contracts to hedge foreigncurrency risk of net assets or net liabilities. As there will be corresponding cashinflows or outflows upon maturity and the Company has sufficient operating funds,the cash flow risk is insignificant.
MediaTek Inc. | 2014 Annual Report F-87
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(2) Financial risk management objectivesThe Company�s principal financial risk management objective is to manage the marketrisk, credit risk and liquidity risk related to its operating activities. The Companyidentifies, measures and manages the aforementioned risks based on the Company�spolicy and risk tendency.
The Company has established appropriate policies, procedures and internal controls forfinancial risk management. The plans for material treasury activities are reviewed byBoard of Directors in accordance with relevant regulations and internal controls. TheCompany complies with its financial risk management policies at all times.
A. Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of the changes in market prices. Market prices comprise foreigncurrency risk, interest rate risk and other price risk.
In practice, it is rarely the case that a single risk variable will change independentlyfrom other risk variable, there are usually interdependencies between risk variables.However the sensitivity analysis disclosed below does not take into account theinterdependencies between risk variables.
a. Foreign currency riskThe Company�s exposure to the risk of changes in foreign exchange rates relatesprimarily to the Company�s operating activities (when revenue or expense aredenominated in a different currency from the Company�s functional currency) andthe Company�s net investments in foreign subsidiaries.
The Company reviews its assets and liabilities denominated in foreign currency andenters into forward exchange contracts to hedge the exposure from exchange ratefluctuations. The level of hedging depends on the foreign currency requirementsfrom each operating unit. As the purpose of holding forward exchange contracts areto hedge exchange rate fluctuation risk, the gain or loss made on the contracts fromthe fluctuation in exchange rates are expected to mostly offset gains or losses madeon the hedged item. Hedge accounting is not applied as they did not qualify forhedge accounting criteria. Furthermore, as net investments in foreign subsidiariesare for strategic purposes, they are not hedged by the Company.
MediaTek Inc. | 2014 Annual Report F-88
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The foreign currency sensitivity analysis of the possible change in foreign exchangerates on the Company�s profit is performed on significant monetary itemsdenominated in foreign currencies as of the end of the reporting period. TheCompany�s foreign currency risk is mainly related to the volatility in the exchangerates for USD. The information of the sensitivity analysis is as follows:
When NTD appreciates or depreciates against USD by 1 cent, the profit for theyears ended December 31, 2014 and 2013 decreases/increases by NT$1,790thousand and NT$1,399 thousand, while equity decreases/increases by NT$23,766thousand and NT$18,669 thousand, respectively.
b. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Company�s exposure to the risk of changes in market interest rates relates primarily
to the Company�s loans and receivables at variable interest rates, bank borrowings
with fixed interest rates. Moreover, the market value of the Company�s investments
in credit-linked deposits and interest rate-linked deposits are affected by interest
rate. The market value would decrease (even lower than the principal) when the
interest rate increases, and vice versa. The market values of exchange rate-linked
deposits are affected by interest rates and changes in the value and volatility of the
underlying. The following sensitivity analysis focuses on interest rate risk and does
not take into account the interdependencies between risk variables.
The interest rate sensitivity analysis is performed on items exposed to interest rate
risk as of the end of the reporting period, including investments with variable
interest rates. At the reporting date, an increase/decrease of 10 basis points of
interest rate in a reporting period could cause the profit for the years ended
December 31, 2014 and 2013 to increase/decrease by NT$1,198 thousand and
NT$2,570 thousand, respectively.
MediaTek Inc. | 2014 Annual Report F-89
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
c. Other price riskThe Company�s listed and unlisted equity securities are susceptible to market pricerisk arising from uncertainties about future values of the investment securities. TheCompany�s listed equity securities are classified under available-for-sale financialassets (including financial assets measured at cost). The Company manages theequity price risk through diversification and placing limits on individual and totalequity instruments. Reports on the equity portfolio are submitted to the Company�ssenior management on a regular basis. The Company�s Board of Directors reviewsand approves certain equity investments according to level of authority.
A change of 1% in the price of the listed equity securities classified underavailable-for-sale could only impact the Company�s equity and cause the othercomprehensive income for the years ended December 31, 2014 and 2013 toincrease/decrease by NT$101,810 thousand and NT$61,781 thousand, respectively.
B. Credit risk managementCredit risk is the risk that counterparty will not meet its obligations under a contract,leading to a financial loss. The Company is exposed to credit risk from operatingactivities (primarily for trade receivables) and from its financing activities, includingbank deposits and other financial instruments.
Customer credit risk is managed by each business unit subject to the Company�sestablished policy, procedures and controls relating to customer credit riskmanagement. Credit limits are established for all customers based on their financialposition, rating from credit rating agencies, historical experience, prevailing economiccondition and the Company�s internal rating criteria, etc. Certain customer�s credit riskwill also be managed by taking credit enhancing procedures, such as requesting forprepayment.
As of December 31, 2014 and 2013, receivables from top ten customers represented59.92% and 65.45% of the total trade receivables of the Company, respectively. Thecredit concentration risk of other accounts receivables was insignificant.
MediaTek Inc. | 2014 Annual Report F-90
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company�s exposure to credit risk arises from potential default of thecounter-party or other third-party. The level of exposure depends on several factorsincluding concentrations of credit risk, components of credit risk, the price of contractand other receivables of financial instruments. Since the counter-party or third-party tothe foregoing forward exchange contracts are all reputable financial institutions,management believes that the Company�s exposure to default by those parties isminimal.
Credit risk of credit-linked deposits, interest rate-linked deposits, exchange rate-linkeddeposit, index-linked deposit and convertible bonds arises if the issuing banksbreached the contracts or the debt issuer could not pay off the debts; the maximumexposure is the carrying value of those financial instruments. Therefore, the Companyminimized the credit risk by only transacting with counter-party who is reputable,transparent and in good financial standing.
C. Liquidity risk managementThe Company�s objective is to maintain a balance between continuity of funding andflexibility through the use of cash and cash equivalents, highly liquid equityinvestments and bank borrowings. The table below summarizes the maturity profile ofthe Company�s financial liabilities based on the contractual undiscounted paymentsand contractual maturity. The payment amount includes the contractual interest. Theundiscounted payment relating to borrowings with variable interest rates isextrapolated based on the estimated interest rate yield curve as of the end of thereporting period.
Non-derivative financial instrumentsLess than 1 year 1 to 5 years Total
As of December 31, 2014
Borrowings $ 46,198,425 $ - $ 46,198,425
Trade payables (including related parties) 14,605,160 - 14,605,160
Other payables 32,751,115 - 32,751,115
Long-term payables 38,062 53,920 91,982
Total $ 93,592,762 $ 53,920 $ 93,646,682
MediaTek Inc. | 2014 Annual Report F-91
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Less than 1 year 1 to 5 years Total
As of December 31, 2013Borrowings $ 29,094,447 $ - $ 29,094,447Trade payables (including related parties) 10,944,174 - 10,944,174Other payables 16,812,303 - 16,812,303Long-term payables 29,950 86,855 116,805
Total $ 56,880,874 $ 86,855 $ 56,967,729
Derivative financial instrumentsLess than 1 year 1 to 5 years Total
As of December 31, 2014Gross settlement
Forward exchange contractsInflow $ 1,947,181 $ - $ 1,947,181Outflow (1,950,657) - (1,950,657)
Net (3,476) - (3,476)
Net settlementForward exchange contracts (48,000) - (48,000)
Total $ (51,476) $ - $ (51,476)
Less than 1 year 1 to 5 years Total
As of December 31, 2013Gross settlement
Forward exchange contractsInflow $ 590,400 $ - $ 590,400Outflow (599,000) - (599,000)
Net (8,600) - (8,600)
Net settlementForward exchange contracts (25,930) - (25,930)
Total $ (34,530) $ - $ (34,530)
The table above contains the undiscounted net cash flows of derivative financialinstruments.
MediaTek Inc. | 2014 Annual Report F-92
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(3)Significant assets and liabilities denominated in foreign currenciesInformation regarding the significant assets and liabilities denominated in foreigncurrencies is listed below:
December 31, 2014Foreign Currency
(thousand) Exchange rate NT$ (thousand)Financial assetsMonetary item:
USD $ 4,270,165 31.718 $ 135,441,097CNY $ 385,235 5.113 $ 1,969,519
Non-monetary item:USD $ 551,121 31.718 $ 17,480,448CNY $ 238,133 5.113 $ 1,217,458
Financial liabilitiesMonetary item:
USD $ 2,265,729 31.718 $ 71,864,391CNY $ 361,150 5.113 $ 1,846,383
December 31, 2013Foreign Currency
(thousand) Exchange rate NT$ (thousand)Financial assetsMonetary item:
USD $ 3,222,505 29.950 $ 96,514,018CNY $ 3,000 4.947 $ 14,841
Non-monetary item:USD $ 312,787 29.950 $ 9,367,985CNY $ 58,203 4.947 $ 287,924
Financial liabilitiesMonetary item:
USD $ 1,528,514 29.950 $ 45,778,992
MediaTek Inc. | 2014 Annual Report F-93
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(4)Capital managementThe primary objective of the Company�s capital management is to ensure that itmaintains a strong credit rating and healthy capital ratios in order to support its businessand maximize shareholder value. The Company manages its capital structure and makesadjustments to it, in light of changes in economic conditions. To maintain or adjust thecapital structure, the Company may adjust dividend payment to shareholders, returncapital to shareholders or issue new shares.
13. Segment Information(1) General information
The major sales of the Company come from multimedia and mobile phone chips and otherintegrated circuit design products. The chief operating decision maker reviews the overalloperating results to make decisions about resources to be allocated to and evaluates theoverall performance. Therefore, the Company is aggregated into a single segment.
(2) Geographical informationa. Sales to other than consolidated entities
For the years ended December 31 2014 2013
Taiwan $ 8,839,280 $ 8,690,900Asia 190,829,061 126,687,863Others 13,394,575 677,191Total $ 213,062,916 $ 136,055,954
Sales are presented by customers� country.
b. Non-current assetsDecember 31, 2014 December 31, 2013
Taiwan $ 73,073,752 $ $22,226,180Asia 11,016,882 3,757,147Others 81,667 956,468Total $ 84,172,301 $ $26,939,795
MediaTek Inc. | 2014 Annual Report F-94
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(3) Major customersSales to customers representing over 10% of the Company�s consolidated net sales are asfollows:
For the years ended December 31 2014 2013
Customers Amounts % Amounts %A $ 18,549,737 8.71 $ 20,855,656 15.33B 14,347,576 6.73 14,004,694 10.29
Total $ 32,897,313 15.44 $ 34,860,350 25.62
MediaTek Inc. | 2014 Annual Report F-95
English Translation of a Report and Financial Statements Originally Issued in Chinese
MEDIATEK INC.
PARENT COMPANY ONLYFINANCIAL STATEMENTS
WITHREPORT OF INDEPENDENT ACCOUNTANTS
FOR THE YEARS THEN ENDEDDECEMBER 31, 2014 AND 2013
MediaTek Inc. | 2014 Annual Report F-96
MediaTek Inc. | 2014 Annual Report F-97
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MediaTek Inc. | 2014 Annual Report F-98
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MediaTek Inc. | 2014 Annual Report F-99
Description Notes 2014 % 2013 %
Net sales 4, 5, 6(15), 7 136,265,018$ 100 96,230,064$ 100
Operating costs 4, 5, 6(6), 6(16), 7 (67,990,658) (50) (54,894,385) (57)
Gross profit 68,274,360 50 41,335,679 43
Realized (unrealized) gross profit on sales 59,028 - (59,028) -
Gross profit, net 68,333,388 50 41,276,651 43
Operating expenses 6(16), 7
Selling expenses (4,761,200) (3) (3,476,394) (4)
Administrative expenses (3,003,315) (2) (1,998,501) (2)
Research and development expenses (26,701,696) (20) (16,989,264) (18)
Total operating expenses (34,466,211) (25) (22,464,159) (24)
Operating income 33,867,177 25 18,812,492 19
Non-operating income and expenses
Other income 4, 6(17), 7 1,201,272 1 593,595 1
Other gains and losses 4, 6(18) 909,759 1 243,961 -
Finance costs 6(19) (170,523) - (20,981) -Share of profit of subsidiaries and associates accounted for using the
equity method4, 6(7) 14,292,618 10 9,578,438 10
Total non-operating income and expenses 16,233,126 12 10,395,013 11
Net income before income tax 50,100,303 37 29,207,505 30
Income tax expense 4, 5, 6(20) (3,702,411) (3) (1,692,453) (1)
Net income 46,397,892 34 27,515,052 29
Other comprehensive income 4, 6(7), 6(12), 6(13), 6(20)Exchange differences resulting from translating the financial
statements of foreign operations 6,645,482 5 1,813,956 2
Unrealized gains from available-for-sale financial assets (263,561) - 313,902 -
Actuarial losses on defined benefit plans (331,755) - (55,167) -Share of other comprehensive income of subsidiaries and associates
accounted for using the equity method 1,123,022 - 2,172,890 2
Income tax relating to components of other comprehensive income 56,399 - - -
Other comprehensive income, net of tax 7,229,587 5 4,245,581 4
Total comprehensive income 53,627,479$ 39 31,760,633$ 33
Basic Earnings Per Share (in New Taiwan Dollars) 6(21) 30.04$ 20.51$
Diluted Earnings Per Share (in New Taiwan Dollars) 6(21) 29.96$ 20.42$
Chairman : Ming-Kai Tsai President : Ching-Jiang Hsieh Chief Financial Officer : David Ku
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
English Translation of Financial Statements Originally Issued in Chinese
MEDIATEK INC.
(Amounts in thousands of New Taiwan Dollars, except for earnings per share)
The accompanying notes are an integral part of the parent company only financial statements.
For the years ended December 31, 2014 and 2013
MediaTek Inc. | 2014 Annual Report F-100
Com
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MediaTek Inc. | 2014 Annual Report F-101
(Amounts in thousands of New Taiwan Dollars)
2014 2013Cash flows from operating activities :
Profit before tax from continuing operations 50,100,303$ 29,207,505$Adjustments for:
The profit or loss items which did not affect cash flows:Depreciation 695,186 576,119Amortization 348,171 117,935Bad debt provision 23,440 24,411Loss (gain) on financial assets and liabilities at fairvalue through profit or loss (20,996) 15,227Interest expenses 170,523 20,981Interest income (1,024,947) (397,445)Dividend income (62,698) (48,197)Share of profit of subsidiaries and associates accounted for using the equity method (14,292,618) (9,578,438)Losses on disposal of property, plant and equipment 210 445(Gain) loss on disposal of investments (10,086) 16,113(Realized) unrealized gross profit on sales (59,028) 59,028
Changes in operating assets and liabilities:Financial assets at fair value through profit or loss (777,265) (259,369)Trade receivables 1,480,522 (1,193,071)Trade receivables from related parties (17,415) (128,342)Other receivables (702,890) 1,400,619Inventories (997,343) 4,840,600Prepayments (390,209) (575,987)Other current assets (288,644) 28,054Trade payables (827,555) 272,542Trade payables to related parties (45,787) 317,324Other payables 9,517,526 3,008,653Other current liabilities (363,010) 496,406Long-term payables (19,379) -Accrued pension liabilities 12,143 8,284
Cash generated from operating activitiesInterest received 936,802 404,316Dividend received 30,384,445 3,247,709Interest paid (170,009) (12,240)Income tax paid (2,410,073) (810,949)
Net cash provided by operating activities 71,189,319 31,058,233
Cash flows from investing activities :Acquisition of available-for-sale financial assets (546,034) -Proceeds from disposal of available-for-sale financial assets - 499,551Acquisition of bond investments for which no active market exists (489,037) (37)Acquisition of investments accounted for using the equity method (278,494) -Proceeds from disposal of bond investments for which no active market exists 294,279 -Proceeds of cash due to merger transaction 8,171,812 -Acquisition of property, plant and equipment (2,191,476) (639,516)Proceeds from disposal of property, plant and equipment - 7,456Decrease in refundable deposits 39,315 41,257Acquisition of intangible assets (418,613) (318,355)
Net cash provided by (used in) investing activities 4,581,752 (409,644)
Cash flows from financing activities :Increase in short-term borrowings 21,305,690 6,805,850Increase in deposits received 2,768 17,719Proceeds from exercise of employee stock options 223,003 94,732Cash dividends (23,565,323) (12,144,424)
Net cash used in financing activities (2,033,862) (5,226,123)
Net increase in cash and cash equivalents 73,737,209 25,422,466Cash and cash equivalents at the beginning of the period 53,710,940 28,288,474
Cash and cash equivalents at the end of the period 127,448,149$ 53,710,940$
Chairman : Ming-Kai Tsai President : Ching-Jiang Hsieh Chief Financial Officer : David Ku
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
The accompanying notes are an integral part of the parent company only financial statements.
Description
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWSFor the years ended Dcecember 31, 2014 and 2013
MediaTek Inc. | 2014 Annual Report F-102
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
1. Organization and OperationAs officially approved, MediaTek Inc. ("the Company") was incorporated at HsinchuScience-based Industrial Park on May 28, 1997. Since then, it has been specialized in the R&D,production, manufacturing and marketing of multimedia integrated circuits (ICs), computerperipherals oriented ICs, high-end consumer-oriented ICs and other ICs of extraordinaryapplication. Meanwhile, it has rendered design, test runs, maintenance and repair andtechnological consultation services for software & hardware of the aforementioned products,import and export trades for the aforementioned products, sale and delegation of patents andcircuit layout rights for the aforementioned products.
2. Date and Procedures of Authorization of Financial Statements for IssueThe parent company only financial statements were authorized for issue in accordance with aresolution of the Board of Directors on March 19, 2015.
3. Newly Issued or Revised Standards and Interpretations(1) Standards or interpretations issued, revised or amended, which recognized by Financial
Supervisory Commission (�FSC�) and effective for annual periods beginning on or afterJanuary 1, 2015, but not yet adopted by the Company at the date of issuance of theCompany�s financial statements are listed below:
Standards orInterpretations Numbers The Projects of Standards or Interpretations Effective DatesImprovements to International Financial Reporting Standards (issued in 2010)
IFRS 1 �First-time Adoption of International FinancialReporting Standards�
January 1, 2011
IFRS 3 �Business Combinations� July 1, 2010IFRS 7 �Financial Instruments: Disclosures� January 1, 2011IAS 1 �Presentation of Financial Statements� January 1, 2011IAS 34 �Interim Financial Reporting� January 1, 2011IFRIC 13 �Customer Loyalty Programmes� January 1, 2011
IFRS 7 Limited Exemption from ComparativeDisclosures for First-time Adopters(Amendments to IFRS 1 �First-timeAdoption of International FinancialReporting Standards�)
July 1, 2010
(To be continued)
MediaTek Inc. | 2014 Annual Report F-103
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)Standards or
Interpretations Numbers The Projects of Standards or Interpretations Effective DatesIFRS 1 �First-time Adoption of International Financial
Reporting Standards� - Severe Hyperinflationand Removal of Fixed Dates for First-timeAdopter
July 1, 2011
IFRS 7 �Financial Instruments: Disclosures�(Amendment)
July 1, 2011
IAS 12 �Income Taxes� (Amendment) - DeferredTaxes: Recovery of Underlying Assets
January 1, 2012
IFRS 10 �Consolidated Financial Statements� January 1, 2013IFRS 11 �Joint Arrangements� January 1, 2013IFRS 12 �Disclosures of Interests in Other Entities� January 1, 2013IFRS 13 �Fair Value Measurement� January 1, 2013IAS 1 �Presentation of Financial Statements�
(Amendment) - Presentation of Items ofOther Comprehensive Income
July 1, 2012
IAS 19 �Employee Benefits� (Revision) January 1, 2013IFRS 1 �First-time Adoption of International Financial
Reporting Standards� - Government LoansJanuary 1, 2013
IFRS 7 �Financial Instruments: Disclosures�(Amendment) - Disclosures - OffsettingFinancial Assets and Financial Liabilities
January 1, 2013
IAS 32 �Financial Instruments: Presentation�(Amendment) - Offsetting Financial Assetsand Financial Liabilities
January 1, 2014
IFRIC 20 �Stripping Costs in the Production Phase of aSurface Mine�
January 1, 2013
Improvements to International Financial Reporting Standards (2009-2011 cycle):IFRS 1 �First-time Adoption of International Financial
Reporting Standards�January 1, 2013
IAS 1 �Presentation of Financial Statements� January 1, 2013IAS 16 �Property, Plant and Equipment� January 1, 2013IAS 32 �Financial Instruments: Presentation� January 1, 2013
(To be continued)
MediaTek Inc. | 2014 Annual Report F-104
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)Standards or
Interpretations Numbers The Projects of Standards or Interpretations Effective DatesIAS 34 �Interim Financial Reporting� January 1, 2013
IFRS 10 �Consolidated Financial Statements�(Amendment)
January 1, 2014
A. Improvements to International Financial Reporting Standards (issued in 2010):a. IFRS 7�Financial Instruments: Disclosures�
The amendment emphasizes the interaction between quantitative and qualitativedisclosures and the nature and extent of risks associated with financial instruments.
b. IAS 1�Presentation of Financial Statements�The amendment clarifies that an entity will present an analysis of other comprehensiveincome for each component of equity, either in the statement of changes in equity or inthe notes to the financial statements.
c. IAS 34�Interim Financial Reporting�The amendment clarifies that if a user of an entity's interim financial report haveaccess to the most recent annual financial report of that entity, it is unnecessary for thenotes to an interim financial report to provide relatively insignificant updates to theinformation that was reported in the notes in the most recent annual financial report.Furthermore, the amendment adds disclosure requirements of financial instruments andcontingent liabilities/assets.
B. IFRS 10 �Consolidated Financial Statements�IFRS 10 replaces the portion of IAS 27 that addresses the accounting for consolidatedfinancial statements and SIC-12. The changes introduced by IFRS 10 primarily relate tothe elimination of the perceived inconsistency between IAS 27 and SIC-12 by introducinga new integrated control model. That is, IFRS 10 primarily relates to whether toconsolidate another entity, but does not change how an entity is consolidated.
C. IFRS 12 �Disclosures of Interests in Other Entities�IFRS 12 primarily integrates and makes consistent the disclosure requirements forsubsidiaries, joint arrangements, associates and unconsolidated structured entities.
MediaTek Inc. | 2014 Annual Report F-105
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
D. IFRS 13 �Fair Value Measurement�IFRS 13 primarily relates to defining fair value, setting out in a single IFRS a frameworkfor measuring fair value and requiring disclosures about fair value measurements toreduce complexity and improve consistency in application when measuring fair value.However, IFRS 13 does not change existing requirements in other IFRS as to when thefair value measurement or related disclosures required.
E. IAS 1�Presentation of Financial Statements� (Amendment) - Presentation of Items ofOther Comprehensive IncomeThe amendments to IAS 1 change the grouping of items presented in othercomprehensive income. Items that would be reclassified (or recycled) to profit or loss inthe future would be presented separately from items that will never be reclassified.
F. IAS 19 �Employee Benefits� (Revision)The revision includes: (1) For defined benefit plans, the ability to defer recognition ofactuarial gains and losses (i.e., the corridor approach) has been removed. Actuarial gainsand losses are now recognized in other comprehensive income. (2) Amounts recorded inprofit or loss are limited to current and past service costs, gains or losses on settlements,and net interest income (expense). (3) New disclosures include quantitative informationabout the sensitivity of the defined benefit obligation to a reasonably possible change ineach significant actuarial assumption. (4) Termination benefits will be recognized at theearlier of when the offer of termination cannot be withdrawn, or when the relatedrestructuring costs are recognized under IAS 37 �Provisions, Contingent Liabilities andContingent Assets�, etc.
G. Improvements to International Financial Reporting Standards (2009-2011 cycle):IAS 1 �Presentation of Financial Statements�The amendment clarifies (1) the difference between voluntary additional comparativeinformation and the minimum required comparative information. Generally, the minimumrequired comparative period is the previous period. (2) An entity must includecomparative information in the related notes to the financial statements when itvoluntarily provides comparative information beyond the minimum required comparativeperiod. The additional comparative period does not need to contain a complete set offinancial statements. (3) The opening statement of financial position (known as �the thirdbalance sheet�) must be presented when an entity changes its accounting policies (makingretrospective restatements or reclassifications) and those changes have a material effecton the statement of financial position. The opening statement would be at the beginningof the preceding period. However, unlike the voluntary comparative information, therelated notes are not required to include comparatives as of the date of the third balancesheet.
MediaTek Inc. | 2014 Annual Report F-106
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
IAS 34 �Interim Financial Reporting�The amendment clarifies the requirements in IAS 34 relating to segment information fortotal assets and liabilities for each reportable segment to enhance consistency with therequirements in IFRS 8 �Operating Segments�. Besides, total assets and liabilities for aparticular reportable segment need to be disclosed only when the amounts are regularlyprovided to the chief operating decision maker and there has been a material change inthe total amount disclosed in the entity�s previous annual financial statements for thatreportable segment.
The abovementioned standards and interpretations issued by IASB and have been recognizedby FSC are effective for annual periods beginning on or after January 1, 2015. The Companyhas evaluated their impact to the Company�s financial position and performance anddetermined that there is no material impact. The Company will make necessary disclosures inaccordance with the abovementioned standards and interpretations.
(2) Standards or Interpretations issued by IASB but not yet recognized by FSC at the date ofissuance of the Company�s financial statements are listed below:
Standards orInterpretations Numbers The Projects of Standards or Interpretations
EffectiveDates
IAS 36 �Impairment of Assets� (Amendment) January 1, 2014IFRIC 21 �Levies� January 1, 2014IAS 39 �Novation of Derivatives and Continuation of
Hedge Accounting�January 1, 2014
IAS 19 �Employee Benefits� (Amendment) - Definedbenefit plans: employee contributions
July 1, 2014
Improvements to International Financial Reporting Standards (2010-2012 cycle):IFRS 2 �Share-based Payment� July 1, 2014IFRS 3 �Business Combinations� July 1, 2014IFRS 8 �Operating Segments� July 1, 2014IFRS 13 �Fair Value Measurement� July 1, 2014IAS 16 �Property, Plant and Equipment� July 1, 2014IAS 24 �Related Party Disclosures� July 1, 2014IAS 38 �Intangible Assets� July 1, 2014
Improvements to International Financial Reporting Standards (2011-2013 cycle):IFRS 1 �First-time Adoption of International Financial
Reporting Standards�July 1, 2014
IFRS 3 �Business Combinations� July 1, 2014IFRS 13 �Fair Value Measurement� July 1, 2014(To be continued)
MediaTek Inc. | 2014 Annual Report F-107
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(Continued)
Standards or
Interpretations Numbers The Projects of Standards or Interpretations
Effective
DatesIAS 40 �Investment Property� July 1, 2014
IFRS 14 �Regulatory Deferral Accounts� January 1, 2016
IFRS 11 �Joint Arrangements�- Joint operation
(Amendment)
January 1, 2016
IAS 16 and IAS 38 �Property, Plant and Equipment� and�Intangible Assets� (Amendment)- Clarification of Acceptable Methods ofDepreciation and Amortization.
January 1, 2016
IFRS 15 �Revenue from Contracts with Customers� January 1, 2017
IAS 16 and IAS 41 �Agriculture: Bearer Plants� (Amendment) January 1, 2016
IFRS 9 �Financial Instruments� January 1, 2018
IAS 27 �Separate Financial Statements� - Equity
Method in Separate Financial Statements
(Amendment)
January 1, 2016
IFRS 10 and IAS 28 �Consolidated Financial Statements� and
�Investments in Associates and Joint
Ventures� (Amendment) - Sale or
Contribution of Assets between an Investor
and its Associate or Joint Ventures
January 1, 2016
Improvements to International Financial Reporting Standards (2012-2014 cycle):
IFRS 5 �Non-current Assets Held for Sale and
Discontinued Operations�
January 1, 2016
IFRS 7 �Financial Instruments: Disclosures� January 1, 2016
IAS 19 �Employee Benefits� January 1, 2016
IAS 34 �Interim Financial Reporting� January 1, 2016
IAS 1 �Presentation of Financial Statements�-
Diclosure Initiative
January 1, 2016
IFRS 10, IFRS 12 and
IAS 28
�Investment Entities�- Applying the
Consolidation Exception
January 1, 2016
MediaTek Inc. | 2014 Annual Report F-108
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
A. IAS 36�Impairment of Assets� (Amendment)This amendment relates to the amendment issued in May 2011 and requires entities todisclose the recoverable amount of an asset (including goodwill) or a cash-generating unitwhen an impairment loss has been recognized or reversed during the period. Theamendment also requires detailed disclosure of how the fair value less costs of disposalhas been measured when an impairment loss has been recognized or reversed, includingvaluation techniques used, level of fair value hierarchy of assets and key assumptionsused in measurement.
B. Improvements to International Financial Reporting Standards (2010-2012 cycle):IFRS 8 �Operating Segments�The amendments require an entity to disclose the judgments made by management inapplying the aggregation criteria to operating segments. The amendments also clarify thatan entity shall only provide reconciliations of the total of the reportable segments' assetsto the entity's assets if the segment assets are reported regularly.
C. Improvements to International Financial Reporting Standards (2011-2013 cycle):IFRS 13 �Fair Value Measurement�The amendment clarifies that paragraph 52 of IFRS 13 includes a scope exception formeasuring the fair value of a group of financial assets and financial liabilities on a netbasis. The objective of this amendment is to clarify that this portfolio exception applies toall contracts within the scope of IAS 39 Financial Instruments: Recognition andMeasurement or IFRS 9 Financial Instruments, regardless of whether they meet thedefinitions of financial assets or financial liabilities as defined in IAS 32 FinancialInstruments: Presentation.
D. IFRS 15 �Revenue from Contracts with Customers�The core principle of the new Standard is for companies to recognize revenue to depictthe transfer of goods or services to customers in amounts that reflect the consideration towhich the company expects to be entitled in exchange for those goods or services. Thenew Standard will also result in enhanced disclosures about revenue, provide guidance fortransactions that were not previously addressed comprehensively and improve guidancefor multiple-element arrangements.
E. IFRS 9 �Financial Instruments�The IASB has issued the final version of IFRS 9, which combines classification andmeasurement, impairment and hedge accounting. The standard will replace IAS 39�Financial Instruments: Recognition and Measurement� and all previous versions of IFRS9 �Financial Instruments� (which include standards issued on classification andmeasurement of financial assets and liabilities and hedge accounting).
MediaTek Inc. | 2014 Annual Report F-109
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Classification and measurement: Financial assets are measured at amortized cost, fairvalue through profit or loss, or fair value through other comprehensive income, based onboth the entity�s business model for managing the financial assets and the financialasset�s contractual cash flow characteristics. Financial liabilities are measured atamortized cost or fair value through profit or loss. Furthermore there is requirement that�own credit risk� adjustments are not recognized in profit or loss.
Impairment: Expected credit loss model is used to evaluate impairment. Entities arerequired to recognize either 12-month or lifetime expected credit losses, depending onwhether there has been a significant increase in credit risk since initial recognition.
Hedge accounting: Hedge accounting is more closely aligned with risk managementactivities and hedge effectiveness is measured based on the hedge ratio.
F. IAS 1 �Presentation of Financial Statements�The amendments contain (1) clarifying that an entity must not reduce theunderstandability of its financial statements by obscuring material information withimmaterial information or by aggregating material items that have different natures orfunctions. The amendments reemphasize that, when a standard requires a specificdisclosure, the information must be assessed to determine whether it is material and,consequently, whether presentation or disclosure of that information is warranted, (2)clarifying that specific line items in the statement(s) of profit or loss and OCI and thestatement of financial position may be disaggregated, and how an entity shall presentadditional subtotals, (3) clarifying that entities have flexibility as to the order in whichthey present the notes to financial statements, but also emphasize that understandabilityand comparability should be considered by an entity when deciding on that order, (4)removing the examples of the income taxes accounting policy and the foreign currencyaccounting policy, as these were considered unhelpful in illustrating what significantaccounting policies could be, and (5) clarifying that the share of OCI of associates andjoint ventures accounted for using the equity method must be presented in aggregate as asingle line item, classified between those items that will or will not be subsequentlyreclassified to profit or loss.
The abovementioned standards and interpretations issued by IASB have not yet been recognizedby FSC at the date of issuance of the Company�s financial statements, the local effective datesare to be determined by FSC. As the Company is still currently determining the potential impactof the standards and interpretations listed under A~F, it is not practicable to estimate their impacton the Company at this point in time. All other standards and interpretations have no materialimpact on the Company.
MediaTek Inc. | 2014 Annual Report F-110
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
4. Summary of Significant Accounting PoliciesStatement of ComplianceThe parent company only financial statements have been prepared in accordance with theRegulations Governing the Preparation of Financial Reports by Securities Issuers (�theRegulations�).
Basis of PreparationAccording to article 21 of the Regulations, the profit or loss and other comprehensive incomepresented in the parent company only financial reports will be the same as the allocations ofprofit or loss and of other comprehensive income attributable to owners of the parent presented inthe financial reports prepared on a consolidated basis, and the owners' equity presented in theparent company only financial reports will be the same as the equity attributable to owners of theparent presented in the financial reports prepared on a consolidated basis. Therefore, theinvestments in subsidiaries will be disclosed under �Investments accounted for using the equitymethod� in the parent company only financial report and change in value will be adjusted.
The parent company only financial statements have been prepared on a historical cost basis,except for financial instruments that have been measured at fair value. The parent company onlyfinancial statements are expressed in thousands of New Taiwan Dollars (�NT$�) unless otherwisestated.
Foreign currency transactionsThe Company�s parent company only financial statements are presented in NT$.
Transactions in foreign currencies are initially recorded by the Company�s entities at theirrespective functional currency rates prevailing at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are retranslated at the functional currency closingrate of exchange ruling at the reporting date. Non-monetary items measured at fair value in aforeign currency are translated using the exchange rates at the date when the fair value isdetermined. Non-monetary items that are measured at historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initial transactions.
All exchange differences arising on the settlement of monetary items or on translating monetaryitems are taken to profit or loss in the period in which they arise except for the following:A. Exchange differences arising from foreign currency borrowings for an acquisition of a
qualifying asset to the extent that they are regarded as an adjustment to interest costs areincluded in the borrowing costs that are eligible for capitalization.
B. Foreign currency items within the scope of IAS 39 �Financial Instruments: Recognition andMeasurement� are accounted for based on the accounting policy for financial instruments.
MediaTek Inc. | 2014 Annual Report F-111
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
C. Exchange differences arising on a monetary item that forms part of a reporting entity�s netinvestment in a foreign operation is recognized initially in other comprehensive income andreclassified from equity to profit or loss on disposal of the net investment.
When a gain or loss on a non-monetary item is recognized in other comprehensive income, anyexchange component of that gain or loss is recognized in other comprehensive income. When again or loss on a non-monetary item is recognized in profit or loss, any exchange component ofthat gain or loss is recognized in profit or loss.
Translation of financial statements in foreign currencyEach foreign operation of the Company determines its function currency upon its primaryeconomic environment and items included in the financial statements of each operation aremeasured using that functional currency. The assets and liabilities of foreign operations aretranslated into New Taiwan Dollars at the closing rate of exchange prevailing at the reportingdate and their income and expenses are translated at an average rate for the period. The exchangedifferences arising on the translation are recognized in other comprehensive income. On thedisposal of a foreign operation, the cumulative amount of the exchange differences relating tothat foreign operation, recognized in other comprehensive income and accumulated in theseparate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. On the partial disposal of foreign operations that result in a loss of control,loss of significant influence or joint control but retain partial equity is considering as disposal.
On the partial disposal of a subsidiary that includes a foreign operation that does not result in aloss of control, the proportionate share of the cumulative amount of the exchange differencesrecognized in other comprehensive income is adjustment in �investments accounted for using theequity method�. In partial disposal of an associate or jointly controlled entity that includes aforeign operation that does not result in a loss of significant influence or joint control, only theproportionate share of the cumulative amount of the exchange differences recognized in othercomprehensive income is reclassified to profit or loss.
Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilitiesarising on the acquisition of a foreign operation are treated as assets and liabilities of the foreignoperation and expressed in its functional currency.
Current and non-current distinctionAn asset is classified as current when:A. The Company expects to realize the asset, or intends to sell or consume it, in its normal
operating cycle
MediaTek Inc. | 2014 Annual Report F-112
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. The Company holds the asset primarily for the purpose of tradingC. The Company expects to realize the asset within twelve months after the reporting periodD. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or
used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:A. The Company expects to settle the liability in its normal operating cycleB. The Company holds the liability primarily for the purpose of tradingC. The liability is due to be settled within twelve months after the reporting periodD. The Company does not have an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period. Terms of a liability that could, at the option ofthe counterparty, result in its settlement by the issue of equity instruments do not affect itsclassification.
All other liabilities are classified as non-current.
Cash and cash equivalentsCash and cash equivalents comprises cash on hand, demand deposits and short-term, highlyliquid investments that are readily convertible to known amounts of cash and which are subject toan insignificant risk of changes in value.
Financial instrumentsFinancial assets and financial liabilities are recognized when the Company becomes a party to thecontractual provisions of the instrument.
Financial assets and financial liabilities within the scope of IAS 39 �Financial Instruments:Recognition and Measurement� are recognized initially at fair value plus or minus, in the case ofinvestments not at fair value through profit or loss, directly attributable transaction costs.
A. Financial assetsAll regular way purchases or sales of financial assets are recognized and derecognized on atrade date basis.
Financial assets of the Company are classified as financial assets at fair value through profitor loss, held-to-maturity investments, available-for-sale financial assets and loans andreceivables. The Company determines the classification of its financial assets at initialrecognition.
MediaTek Inc. | 2014 Annual Report F-113
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
a. Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for tradingand financial assets designated upon initial recognition at fair value through profit or loss.Financial assets at fair value through profit or loss are measured at fair value with changesin fair value recognized in profit or loss. Dividends or interests on financial assets at fairvalue through profit or loss are recognized in profit or loss (including those received duringthe period of initial investment).
A financial asset is classified as held for trading if:(a) it is acquired or incurred principally for the purpose of selling or repurchasing it in
short term;(b) on initial recognition it is part of a portfolio of identified financial instruments that are
managed together and for which there is evidence of a recent actual pattern ofshort-term profit-taking; or
(c) it is a derivative (except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument).
If a contract contains one or more embedded derivatives, the entire hybrid contract may bedesignated as a financial asset at fair value through profit or loss; or a financial asset maybe designated as at fair value through profit or loss when doing so results in more relevantinformation, because either:(a) it eliminates or significantly reduces a measurement or recognition inconsistency; or(b) a group of financial assets, financial liabilities or both is managed and its performance
is evaluated on a fair value basis, in accordance with a documented risk management orinvestment strategy, and information about the group is provided internally on thatbasis to the key management personnel.
If financial assets do not have quoted prices in an active market and their fair value cannotbe reliably measured, then they are classified as financial assets measured at cost onbalance sheet and carried at cost net of accumulated impairment losses, if any, as at thereporting date.
b. Available-for-sale financial assetsAvailable-for-sale investments are non-derivative financial assets that are designated asavailable-for-sale or those not classified as financial assets at fair value through profit orloss, held-to-maturity financial assets, or loans and receivables.
MediaTek Inc. | 2014 Annual Report F-114
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Foreign exchange gains and losses and interest calculated using the effective interestmethod relating to monetary available-for-sale financial assets, or dividends on anavailable-for-sale equity instrument, are recognized in profit or loss. Subsequentmeasurement of available-for-sale financial assets at fair value is recognized in equity untilthe investment is derecognized, at which time the cumulative gain or loss is recognized inprofit or loss.
If equity instrument investments do not have quoted prices in an active market and theirfair value cannot be reliably measured, then they are classified as financial assets measuredat cost on balance sheet and carried at cost net of accumulated impairment losses, if any, asat the reporting date.
c. Held-to-maturity financial assetsNon-derivative financial assets with fixed or determinable payments and fixed maturitiesare classified as held-to-maturity when the Company has the positive intention and abilityto hold it to maturity, other than those that are designated as available-for-sale, classified asfinancial assets at fair value through profit or loss, or meet the definition of loans andreceivables.
After initial measurement held-to-maturity financial assets are measured at amortized costusing the effective interest method, less impairment. Amortized cost is calculated by takinginto account any discount or premium on acquisition and fee or transaction costs. Theeffective interest method amortization is recognized in profit or loss.
d. Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market other than those that the Company uponinitial recognition designates as available for sale, classified as at fair value through profitor loss, or those for which the holder may not recover substantially all of its initialinvestment.
Loans and receivables are separately presented on the balance sheet as receivables or bondinvestments for which no active market exists. After initial measurement, such financialassets are subsequently measured at amortized cost using the effective interest rate method,less impairment. Amortized cost is calculated by taking into account any discount orpremium on acquisition and fee or transaction costs. The effective interest methodamortization is recognized in profit or loss.
MediaTek Inc. | 2014 Annual Report F-115
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
e. Impairment of financial assetsThe Company assesses at each reporting date whether there is any objective evidence thatan individual or a group of financial asset other than the financial assets at fair valuethrough profit or loss is impaired. An individual or a group of financial asset is deemed tobe impaired if, and only if, there is objective evidence of impairment as a result of one ormore loss events that has occurred after the initial recognition of the asset and that lossevent has an impact on the estimated future cash flows of the financial asset. The carryingamount of the financial asset is reduced through the use of an allowance account and theamount of the loss is recognized in profit or loss.
A significant or prolonged decline in the fair value of an available-for-sale equityinstrument below its cost is considered a loss event.
Other loss events include:(a) significant financial difficulty of the issuer or obligor; or(b) a breach of contract, such as a default or delinquency in interest or principal payments;
or(c) it becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or(d) the disappearance of an active market for that financial asset because of financial
difficulties.
For held-to-maturity financial assets and loans and receivables measured at amortized cost,if there is objective evidence that an impairment loss has been incurred, the amount of theloss is measured as the difference between the assets carrying amount and the present valueof estimated future cash flows. The present value of the estimated future cash flows isdiscounted at the financial assets original effective interest rate. Interest income is accruedbased on the reduced carrying amount of the asset, using the rate of interest used todiscount the future cash flows for the purpose of measuring the impairment loss.Receivables together with the associated allowance are written off when there is norealistic prospect of future recovery. If, in a subsequent year, the amount of the estimatedimpairment loss increases or decreases because of an event occurring after the impairmentwas recognized, the previously recognized impairment loss is increased or reduced byadjusting the allowance account. If a future write-off is later recovered, the recovery iscredited to profit or loss.
MediaTek Inc. | 2014 Annual Report F-116
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
In the case of equity instruments classified as available-for-sale, where there is evidence ofimpairment, the cumulative loss - measured as the difference between the acquisition costand the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss - is removed from other comprehensive income and recognizedin profit or loss. Impairment losses on equity investments are not reversed through profit orloss; increases in their fair value after impairment are recognized directly in othercomprehensive income.
In the case of debt instruments classified as available-for-sale, the amount recorded forimpairment is the cumulative loss measured as the difference between the amortized costand the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss. Future interest income continues to be accrued based on thereduced carrying amount of the asset, using the rate of interest used to discount the futurecash flows for the purpose of measuring the impairment loss. The interest income isrecognized in profit or loss. If, in a subsequent year, the fair value of a debt instrumentincreases and the increase can be objectively related to an event occurring after theimpairment loss was recognized in profit or loss, the impairment loss is reversed throughprofit or loss.
f. Derecognition of financial assetsA financial asset is derecognized when:(a) The rights to receive cash flows from the asset have expired(b) The Company has transferred the asset and substantially all the risks and rewards of the
asset have been transferred(c) The Company has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the difference between the carryingamount and the consideration received or receivable including any cumulative gain or lossthat had been recognized in other comprehensive income, is recognized in profit or loss.
B. Financial liabilities and equitya. Classification between liabilities or equity
The Company classifies the instrument issued as a financial liability or an equityinstrument in accordance with the substance of the contractual arrangement and thedefinitions of a financial liability, and an equity instrument.
MediaTek Inc. | 2014 Annual Report F-117
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
b. Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of anentity after deducting all of its liabilities. The transaction costs of an equity transaction areaccounted for as a deduction from equity to the extent they are incremental costs directlyattributable to the equity transaction that otherwise would have been avoided.
c. Financial liabilitiesFinancial liabilities within the scope of IAS 39 �Financial Instruments: Recognition andMeasurement� are classified as financial liabilities at fair value through profit or loss orfinancial liabilities measured at amortized cost upon initial recognition.
(a) Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss include financial liabilities heldfor trading and financial liabilities designated upon initial recognition as at fair valuethrough profit or loss. Gains or losses on the subsequent measurement of liabilities heldfor trading including interest paid are recognized in profit or loss.
A financial liability is classified as held for trading if:i. it is acquired or incurred principally for the purpose of selling or repurchasing it in
short term;ii. on initial recognition it is part of a portfolio of identified financial instruments that
are managed together and for which there is evidence of a recent actual pattern ofshort-term profit-taking; or
iii. it is a derivative (except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument).
If a contract contains one or more embedded derivatives, the entire hybrid contract maybe designated as a financial liability at fair value through profit or loss; or a financialliability may be designated as at fair value through profit or loss when doing so resultsin more relevant information, because either:i. it eliminates or significantly reduces a measurement or recognition inconsistency;
orii. a group of financial assets, financial liabilities or both is managed and its
performance is evaluated on a fair value basis, in accordance with a documentedrisk management or investment strategy, and information about the group isprovided internally on that basis to the key management personnel.
MediaTek Inc. | 2014 Annual Report F-118
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
If the financial liabilities at fair value through profit or loss do not have quoted pricesin an active market and their fair value cannot be reliably measured, then they areclassified as financial liabilities measured at cost on balance sheet and carried at cost asat the reporting date.
(b) Financial liabilities at amortized costFinancial liabilities measured at amortized cost include interest bearing loans andborrowings that are subsequently measured using the effective interest rate methodafter initial recognition. Gains and losses are recognized in profit or loss when theliabilities are derecognized as well as through the effective interest rate methodamortization process.
Amortized cost is calculated by taking into account any discount or premium onacquisition and fees or transaction costs.
(c) Derecognition of financial liabilitiesA financial liability is derecognized when the obligation under the liability isdischarged or cancelled or expires.
C. Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the balancesheet if, and only if, there is a currently enforceable legal right to offset the recognizedamounts and there is an intention to settle on a net basis, or to realize the assets and settle theliabilities simultaneously.
D. Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting dateis determined by reference to quoted market prices, without any deduction for transactioncosts.
For financial instruments not traded in an active market, the fair value is determined usingappropriate valuation techniques. Such techniques may include using recent arm�s lengthmarket transactions; reference to the current fair value of another instrument that issubstantially the same; a discounted cash flow analysis or other valuation models.
MediaTek Inc. | 2014 Annual Report F-119
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Derivative financial instrumentThe Company uses derivative financial instruments to hedge its foreign currency risks andinterest rate risks. A derivative is classified in the balance sheet as financial assets or liabilities atfair value through profit or loss (held for trading) except for derivatives that are designatedeffective hedging instruments which are classified as derivative financial assets or liabilities forhedging.
Derivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently remeasured at fair value. Derivatives arecarried as financial assets when the fair value is positive and as financial liabilities when the fairvalue is negative. Any gains or losses arising from changes in the fair value of derivatives aretaken directly to profit or loss, except for the effective portion of cash flow hedges and hedges ofnet investments in foreign operations, which is recognized in equity.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded atfair value if their economic characteristics and risks are not closely related to those of the hostcontracts and the host contracts are not held for trading or designated at fair value though profitor loss. These embedded derivatives are measured at fair value with changes in fair valuerecognized in profit or loss.
InventoriesCosts incurred in bringing each inventory to its present location and condition. Raw materials arevalued at purchase cost. Finish goods and work in progress include cost of direct materials andrelated manufacturing overheads. Inventories are valued at lower of cost and net realizable valueitem by item. Net realizable value is the estimated selling price in the ordinary course of business,less estimated costs of completion and the estimated costs necessary to make the sale. Inventoriesthat were not sold or moved for further production were assessed allowance and set aside toreflect the potential loss from stock obsolescence.
Investments accounted for using the equity methodThe Company�s investment in its associate is accounted for using the equity method other thanthose that meet the criteria to be classified as held for sale. An associate is an entity over whichthe Company has significant influence.
MediaTek Inc. | 2014 Annual Report F-120
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Under the equity method, the investment in the associate is carried in the balance sheet at costand adjusted thereafter for the post-acquisition change in the Company�s share of net assets of theassociate. After the interest in the associate is reduced to zero, additional losses are provided for,and a liability is recognized, only to the extent that the Company has incurred legal orconstructive obligations or made payments on behalf of the associate. Unrealized gains and lossesresulting from transactions between the Company and the associate are eliminated to the extent ofthe Company�s related interest in the associate.
When changes in the net assets of an associate occur and not those that are recognized in profit orloss or other comprehensive income and do not affects the Company�s percentage of ownershipinterests in the associate, the Company recognizes such changes in equity based on its percentageof ownership interests. The resulting capital surplus recognized will be reclassified to profit orloss at the time of disposing the associate on a pro rata basis.
When the associate issues new stock, and the Company�s interest in an associate is reduced orincreased as the Company fails to acquire shares newly issued in the associate proportionately toits original ownership interest, the increase or decrease in the interest in the associate isrecognized in capital surplus and investments accounted for using the equity method. When theinterest in the associate is reduced, the cumulative amounts previously recognized in othercomprehensive income are reclassified to profit or loss or other appropriate items. Theaforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis whenthe Company disposes the associate.
The financial statements of the associate are prepared for the same reporting period as theCompany. Where necessary, adjustments are made to bring the accounting policies in line withthose of the Company.
The Company determines at each reporting date whether there is any objective evidence that theinvestment in the associate is impaired. If this is the case the Company calculates the amount ofimpairment as the difference between the recoverable amount of the associate and its carryingvalue and recognizes the amount in the �share of profit or loss of an associate� in the statement ofcomprehensive income.
Upon loss of significant influence over the associate, the Company measures and recognizes anyretaining investment at its fair value. Any difference between the carrying amount of theassociate upon loss of significant influence and the fair value of the retaining investment andproceeds from disposal is recognized in profit or loss.
MediaTek Inc. | 2014 Annual Report F-121
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Property, plant and equipmentProperty, plant and equipment is stated at cost, net of accumulated depreciation and accumulatedimpairment losses, if any. Such cost includes the cost of dismantling and removing the item andrestoring the site on which it is located and borrowing costs for construction in progress if therecognition criteria are met. Each part of an item of property, plant and equipment with a costthat is significant in relation to the total cost of the item is depreciated separately. Whensignificant parts of property, plant and equipment are required to be replaced in intervals, theCompany recognized such parts as individual assets with specific useful lives and depreciation,respectively. The carrying amount of those parts that are replaced is derecognized in accordancewith the derecognition provisions of IAS 16 �Property, plant and equipment�. When a majorinspection is performed, its cost is recognized in the carrying amount of the plant and equipmentas a replacement if the recognition criteria are satisfied. All other repair and maintenance costsare recognized in profit or loss as incurred.
Depreciation is calculated on a straight-line basis over the estimated economic lives of thefollowing assets:
Buildings and facilities 3~50 yearsMachinery and equipment 3~5 yearsComputer and telecommunication equipment 3~5 yearsTesting equipment 3~5 yearsMiscellaneous equipment 2~5 years
An item of property, plant and equipment and any significant part initially recognized isderecognized upon disposal or when no future economic benefits are expected from its use ordisposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.
The assets� residual values, useful lives and methods of depreciation are reviewed at eachfinancial year end and adjusted prospectively, if appropriate, and are treated as changes inaccounting estimates.
LeasesA. The Company as a lessee
Operating lease payments are recognized as an expense on a straight-line basis over the leaseterm.
MediaTek Inc. | 2014 Annual Report F-122
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. The Company as a lessorLeases in which the Company does not transfer substantially all the risks and benefits ofownership of the asset are classified as operating leases. Initial direct costs incurred innegotiating an operating lease are added to the carrying amount of the leased asset andrecognized over the lease term on the same basis as rental income.
Intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost ofintangible assets acquired in a business combination is its fair value as at the date of acquisition.Following initial recognition, intangible assets are carried at cost less any accumulatedamortization and accumulated impairment losses, if any. Internally generated intangible assets,excluding capitalized development costs, are not capitalized and expenditure is reflected in profitor loss for the year in which the expenditure is incurred.
Expenditures related to research activities as well as those expenditures not meeting the criteriafor capitalization are expensed when incurred. Expenditures related to development activitiesmeeting the criteria for capitalization are capitalized.
The Company�s intangible assets mainly include patents, software, IPs and others which areacquired from third parties or business combinations. A summary of the amortization policiesapplied to the Company�s intangible assets is as follows:
Patents Software IPs and others2~7 years 2~5 years 2~7 years
Abovementioned intangible assets are amortized on a straight-line basis over the estimated usefullife.
The Company�s intangible assets with finite lives are amortized over the useful economic life andassessed for impairment whenever there is an indication that the intangible asset may be impaired.The amortization period and the amortization method for an intangible asset with a finite usefullife is reviewed at least at the end of each financial year. Changes in the expected useful life orthe expected pattern of consumption of future economic benefits embodied in the asset isaccounted for by changing the amortization period or method, as appropriate, and are treated aschanges in accounting estimates. Gains or losses arising from derecognition of an intangible assetare measured as the difference between the net disposal proceeds and the carrying amount of theasset and are recognized in profit or loss.
MediaTek Inc. | 2014 Annual Report F-123
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Impairment of non-financial assetsThe Company assesses at the end of each reporting period whether there is any indication that anasset in the scope of IAS 36 �Impairment of Assets� may be impaired. If any such indicationexists, or when annual impairment testing for an asset is required, the Company estimates theasset�s recoverable amount. An asset�s recoverable amount is the higher of an asset�s orcash-generating unit�s (�CGU�) fair value less costs to sell and its value in use and is determinedfor an individual asset, unless the asset does not generate cash inflows that are largelyindependent of those from other assets or groups of assets. Where the carrying amount of an assetor CGU exceeds its recoverable amount, the asset is considered impaired and is written down toits recoverable amount.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there isany indication that previously recognized impairment losses may no longer exist or may havedecreased. If such indication exists, the Company estimates the asset�s or cash-generating unit�srecoverable amount. A previously recognized impairment loss is reversed only if there has beenan increase in the estimated service potential of an asset which in turn increases the recoverableamount. However, the reversal is limited so that the carrying amount of the asset does not exceedits recoverable amount, nor exceed the carrying amount that would have been determined, net ofdepreciation, had no impairment loss been recognized for the asset in prior years.
A cash generating unit, or groups of cash-generating units, to which goodwill has been allocatedis tested for impairment annually at the same time, irrespective of whether there is any indicationof impairment. If an impairment loss is to be recognized, it is first allocated to reduce thecarrying amount of any goodwill allocated to the cash generating unit (group of units), then to theother assets of the unit (group of units) pro rata on the basis of the carrying amount of each assetin the unit (group of units). Impairment losses relating to goodwill cannot be reversed in futureperiods for any reason.
An impairment loss of continuing operations or a reversal of such impairment loss is recognizedin profit or loss.
Treasury sharesOwn equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. Any difference between the carrying amount and the consideration isrecognized in equity.
MediaTek Inc. | 2014 Annual Report F-124
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theCompany and the revenue can be reliably measured. Revenue is measured at the fair value of theconsideration received or receivable. The following specific recognition criteria must also be metbefore revenue is recognized:
A. Sale of goods Revenue from the sale of goods is recognized when all the following conditions have beensatisfied:a. the significant risks and rewards of ownership of the goods have passed to the buyer;b. neither continuing managerial involvement nor effective control over the goods sold have
been retained;c. the amount of revenue can be measured reliably;d. it is probable that the economic benefits associated with the transaction will flow to the
entity; ande. the costs incurred in respect of the transaction can be measured reliably.
The amount of revenue is measured at the fair value of the consideration received orreceivable taking into account the amount of any trade discounts and volume rebatesallowed by entity. The Company estimates sales returns and allowance based on historicalexperience and other known factors at the time of sale, which reduces the operatingrevenue.
B. Interest incomeFor all financial assets measured at amortized cost (including loans and receivables andheld-to-maturity financial assets) and available-for-sale financial assets, interest income isrecorded using the effective interest rate method and recognized in profit or loss.
C. DividendsRevenue is recognized when the Company�s right to receive the payment is established.
Post-employment benefitsAll regular employees of the Company are entitled to a pension plan that is managed by anindependently administered pension fund committee. Fund assets are deposited under thecommittee�s name in the specific bank account and hence, not associated with the Company.Therefore fund assets are not included in the Company�s parent company only financialstatements.
MediaTek Inc. | 2014 Annual Report F-125
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
For the defined contribution plan, the Company will make a monthly contribution of no less than6% of the monthly wages of the employees subject to the plan. The Company recognizesexpenses for the defined contribution plan in the period in which the contribution becomes due.
Post-employment benefit plan that is classified as a defined benefit plan uses the Projected UnitCredit Method to measure its obligations and costs based on actuarial assumptions. The Companyrecognizes all actuarial gains and losses in the period in which they occur in other comprehensiveincome. Actuarial gains and losses recognized in other comprehensive income are recognizedimmediately in retained earnings. Pension cost for an interim period is calculated on ayear-to-date basis by using the actuarially determined pension cost rate at the end of the priorfinancial year, adjusted and disclosed for significant market fluctuations since that time and forsignificant curtailments, settlements, or other significant one-off events.
Share-based payment transactionsThe cost of equity-settled transactions between the Company and its subsidiaries is recognizedbased on the fair value of the equity instruments granted. The fair value of the equity instrumentsis determined by using an appropriate pricing model.
The cost of equity-settled transactions is recognized, together with a corresponding increase inother capital reserves in equity, over the period in which the performance and/or serviceconditions are fulfilled. The cumulative expense recognized for equity-settled transactions at eachreporting date until the vesting date reflects the extent to which the vesting period has expiredand the Company�s best estimate of the number of equity instruments that will ultimately vest.The income statement expense or credit for a period represents the movement in cumulativeexpense recognized as at the beginning and end of that period.
No expense is recognized for awards that do not ultimately vest, except for equity-settledtransactions where vesting is conditional upon a market or non-vesting condition, which aretreated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the minimum expenserecognized is the expense as if the terms had not been modified, if the original terms of the awardare met. An additional expense is recognized for any modification that increases the total fairvalue of the share-based payment transaction, or is otherwise beneficial to the employee asmeasured at the date of modification.
MediaTek Inc. | 2014 Annual Report F-126
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation,and any expense not yet recognized for the award is recognized immediately. This includes anyaward where non-vesting conditions within the control of either the entity or the employee arenot met. However, if a new award is substituted for the cancelled award, and designated as areplacement award on the date that it is granted, the cancelled and new awards are treated as ifthey were a modification of the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in thecomputation of diluted earnings per share.
Income taxesIncome tax expense (income) is the aggregate amount included in the determination of profit orloss for the period in respect of current tax and deferred tax.
A. Current income taxCurrent income tax assets and liabilities for the current and prior periods are measured at theamount expected to be recovered from or paid to the taxation authorities, using the tax ratesand tax laws that have been enacted or substantively enacted by the end of the reportingperiod. Current income tax relating to items recognized in other comprehensive income ordirectly in equity is recognized in other comprehensive income or equity and not in profit orloss.
The 10% income tax for undistributed earnings is recognized as income tax expense in thesubsequent year when the distribution proposal is approved by the shareholders� meeting.
B. Deferred taxDeferred tax is provided on temporary differences at the reporting date between the tax basesof assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:a. Where the deferred tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and, at the time of thetransaction, affects neither the accounting profit nor taxable profit or loss.
MediaTek Inc. | 2014 Annual Report F-127
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
b. In respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will notreverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward ofunused tax credits and unused tax losses, to the extent that it is probable that taxable profitwill be available against which the deductible temporary differences, and the carry forward ofunused tax credits and unused tax losses can be utilized, except:
a. Where the deferred tax asset relating to the deductible temporary difference arises from theinitial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting profit nor taxable profit orloss.
b. In respect of deductible temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, deferred tax assets are recognized only to theextent that it is probable that the temporary differences will reverse in the foreseeablefuture and taxable profit will be available against which the temporary differences can beutilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply inthe year when the asset is realized or the liability is settled, based on tax rates and tax lawsthat have been enacted or substantively enacted at the reporting date. The measurement ofdeferred tax assets and deferred tax liabilities reflects the tax consequences that would followfrom the manner in which the Company expects, at the end of the reporting period, to recoveror settle the carrying amount of its assets and liabilities.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit orloss. Deferred tax items are recognized in correlation to the underlying transaction either inother comprehensive income or directly in equity. Deferred tax assets are reassessed at eachreporting date and are recognized accordingly.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists toset off current income tax assets against current income tax liabilities and the deferred taxesrelate to the same taxable entity and the same taxation authority.
Interim period income tax expense is estimated using the tax rate that would be applicable toexpected total annual earnings, that is, calculated by the pre-tax income of the interim periodmultiply by the estimated average annual effective income tax rate.
MediaTek Inc. | 2014 Annual Report F-128
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Business combinations and goodwillBusiness combinations are accounted for using the acquisition method. The considerationtransferred, the identifiable assets acquired and liabilities assumed are measured at acquisitiondate fair value. For each business combination, the acquirer measures any non-controlling interestin the acquiree either at fair value or at the non-controlling interest�s proportionate share of theacquiree�s identifiable net assets. Acquisition-related costs are accounted for as expenses in theperiods in which the costs are incurred and are classified under administrative expenses.
When the Company acquires a business, it assesses the assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at the acquisition date. This includes the separation ofembedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer�spreviously held equity interest in the acquiree is remeasured to fair value at the acquisition datethrough profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognized at theacquisition-date fair value. Subsequent changes to the fair value of the contingent considerationwhich is deemed to be an asset or liability, will be recognized in accordance with IAS 39�Financial Instruments: Recognition and Measurement� either in profit or loss or as a change toother comprehensive income. However, if the contingent consideration is classified as equity, itshould not be remeasured until it is finally settled within equity.
Goodwill is initially measured as the amount of the excess of the aggregate of the considerationtransferred and the non-controlling interest over the net fair value of the identifiable assetsacquired and the liabilities assumed. If this aggregate is lower than the fair value of the net assetsacquired, the difference is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.Goodwill acquired in a business combination is, from the acquisition date, allocated to each ofthe Company�s cash-generating units that are expected to benefit from the combination,irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Eachunit or group of units to which the goodwill is so allocated represents the lowest level within theCompany at which the goodwill is monitored for internal management purpose and is not largerthan an operating segment before aggregation.
MediaTek Inc. | 2014 Annual Report F-129
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
5. Significant Accounting Judgments, Estimates and AssumptionsThe preparation of the Company�s parent company only financial statements requiremanagement to make judgments, estimates and assumptions that affect the reported amounts ofrevenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end ofthe reporting period. The judgments and estimates made by the Company are based on historicalexperience and other related factors and continuously being evaluated and adjusted. Please referto below description:
Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that may cause a material adjustment to the carrying amounts of assets andliabilities within the next financial year are discussed below.
A. Fair value of financial instrumentsWhere the fair value of financial assets and financial liabilities recorded in the balance sheetcannot be derived from active markets, they are determined using valuation techniquesincluding the income approach (for example the discounted cash flows model) or marketapproach. Changes in assumptions about these factors could affect the reported fair value ofthe financial instruments. Please refer to Note 12 for more details.
B. Valuation of inventoryInventories are stated at the lower of cost or net realizable value, and the Company usesjudgment and estimate to determine the net realizable value of inventory at the end of eachreporting period.
Due to the rapid technological changes, the Company estimates the net realizable value ofinventory for obsolescence and unmarketable items at the end of reporting period and thenwrites down the cost of inventories to net realizable value. The net realizable value of theinventory is mainly determined based on assumptions of future demand within a specific timehorizon.
C. Income taxUncertainties exist with respect to the interpretation of complex tax regulations and theamount and timing of future taxable income. Given the wide range of international businessrelationships and the long-term nature and complexity of existing contractual agreements,differences arising between the actual results and the assumptions made, or future changes tosuch assumptions, could cause future adjustments to tax income and expense already recorded.The Company establishes provisions, based on reasonable estimates, for possibleconsequences of audits by the tax authorities of the respective countries in which it operates.The amount of such provisions is based on various factors, such as experience of previous taxaudits and differing interpretations of tax regulations by the taxable entity and the responsibletax authority. Such differences of interpretation may arise on a wide variety of issuesdepending on the conditions prevailing in the respective company's domicile.
MediaTek Inc. | 2014 Annual Report F-130
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Deferred tax assets are recognized for all carryforward of unused tax losses and unused taxcredits and deductible temporary differences to the extent that it is probable that taxable profitwill be available or there are sufficient taxable temporary differences against which theunused tax losses, unused tax credits or deductible temporary differences can be utilized. Theamount of deferred tax assets determined to be recognized is based upon the likely timing andthe level of future taxable profits and taxable temporary differences together with future taxplanning strategies.
D. Revenue recognition - sales returns and discountsThe Company estimates sales returns and discounts based on historical experience and otherknown factors at the time of sale, which reduces the sales. The management periodicallyreviews the adequacy of the estimation used.
6. Contents of Significant Accounts(1) Cash and cash equivalents
December 31, 2014
December 31, 2013
Checking and savings accounts $ 16,685,470 $ 6,455,890
Time deposits 110,762,679 47,255,050
Total $ 127,448,149 $ 53,710,940
Time deposits include deposits whose maturities are under twelve months and are readilyconvertible to known amounts of cash with values subject to an insignificant risk of changes.
Cash and cash equivalents were not pledged.
(2) Financial assets and financial liabilities at fair value through profit or lossFinancial assets designated upon initial recognition at fair value through profit or loss:
December 31, 2014
December 31, 2013
CurrentCredit-linked deposits $ 295,272 $ 50,053
NoncurrentCredit-linked deposits 795,503 225,334
Convertible bonds - 35,000
Subtotal 795,503 260,334Total $ 1,090,775 $ 310,387
MediaTek Inc. | 2014 Annual Report F-131
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Financial assets and financial liabilities held for trading:December 31,
2014December 31,
2013Current assets
Forward exchange contracts $ 1,871 $ 7,420
Current liabilitiesForward exchange contracts $ 2,595 $ 26,017
Financial assets at fair value through profit or loss were not pledged.
(3) Available-for-sale financial assetsDecember 31,
2014December 31,
2013Current
Funds $ 1,599,691 $ 1,570,378
Stocks 632,583 749,459
Depositary receipts 28,010 22,577Subtotal 2,260,284 2,342,414
NoncurrentFunds 2,432,403 2,067,800
Total $ 4,692,687 $ 4,410,214
Available-for-sale financial assets were not pledged.
(4) Bond investments for which no active market existsDecember 31,
2014December 31,
2013Current
Bonds $ 297,924 $ -Time deposits 10,209 112,021
Total $ 308,133 $ 112,021
Please refer to Note 8 for more details on bond investments for which no active market existsunder pledge.
MediaTek Inc. | 2014 Annual Report F-132
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(5) Trade receivables and trade receivables from related partiesDecember 31,
2014December 31,
2013Trade receivables $ 9,065,554 $ 9,856,716Less: allowance for doubtful debts (87,376) (52,002)Less:allowance for sales returns and discounts (5,202,955) (5,690,866)Subtotal 3,775,223 4,113,848Trade receivables from related parties 179,720 160,054Less: allowance for doubtful debts - -Subtotal 179,720 160,054Total $ 3,954,943 $ 4,273,902
Trade receivables were not pledged.
Trade receivables are generally on 45-60 day terms. The movements in the provision forimpairment of trade receivables and trade receivables from related parties are as follows(please refer to Note 12 for credit risk disclosure):
Individuallyimpaired
Collectivelyimpaired Total
As of January 1, 2014 $ - $ 52,002 $ 52,002Charge for the current period - 23,440 23,440Effect of acquisition of subsidiaries - 11,934 11,934As of December 31, 2014 $ - $ 87,376 $ 87,376
Individuallyimpaired
Collectivelyimpaired Total
As of January 1, 2013 $ - $ 27,591 $ 27,591Charge for the current period - 24,411 24,411As of December 31, 2013 $ - $ 52,002 $ 52,002
Aging analysis of trade receivables and trade receivables from related parties that were pastdue as of the end of the reporting period but not impaired is as follows:
Past due but not impaired
As ofNeither past due
nor impaired 1 to 90 daysMore than
91 days TotalDecember 31, 2014 $ 3,331,654 $ 623,289 $ - $ 3,954,943December 31, 2013 $ 4,065,877 $ 208,025 $ - $ 4,273,902
MediaTek Inc. | 2014 Annual Report F-133
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company entered into several factoring agreements without recourse with financialinstitutions. According to those agreements, the Company does not take the risk ofuncollectible trade receivables, but only the risk of loss due to commercial disputes. TheCompany did not provide any collateral, and the factoring agreements met the criteria offinancial asset derecognition. The Company derecognized related trade receivables afterdeducting the estimated value of commercial disputes. The Company has not withdrawn cashentitled by the factoring agreements from banks as of December 31, 2014 and 2013.Receivables from banks due to factoring agreement were NT$1,372,808 thousand, andNT$1,614,185 thousand, respectively.
As of December 31, 2014 and 2013 trade receivables derecognized were as follows:
(a) As of December 31, 2014:
The Factor(Transferee)
Interestrate
Tradereceivables
derecognized(US$�000)
Cashwithdrawn(US$�000)
Unutilized(US$�000)
Credit line(US$�000)
Taishin InternationalBank
- $ 28,590 $ - $ 28,590 $104,510
BNP Paribas - 14,168 - 14,168 100,000HSBC - 340 - 340 800TC Bank - 183 - 183 1,500Total $ 43,281 $ - $ 43,281 $206,810
(b) As of December 31, 2013:
The Factor(Transferee)
Interestrate
Tradereceivables
derecognized(US$�000)
Cashwithdrawn(US$�000)
Unutilized(US$�000)
Credit line(US$�000)
Taishin InternationalBank
- $ 34,028 $ - $ 34,028 $ 148,434
BNP Paribas - 19,868 - 19,868 100,000Total $ 53,896 $ - $ 53,896 $ 248,434
MediaTek Inc. | 2014 Annual Report F-134
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(6) InventoriesDecember 31,
2014December 31,
2013Raw materials $ 499 $ -Work in progress 7,581,174 5,150,525Finished goods 6,686,483 3,481,697Total 14,268,156 8,632,222Less: allowance for inventory valuation losses (6,363,554) (2,883,588)Net amount $ 7,904,602 $ 5,748,634
For the years ended December 31, 2014 and 2013, the cost of inventories recognized inexpenses amounted to NT$67,990,658 thousand and NT$54,894,385 thousand, including thewrite-down of inventories of NT$3,309,365 thousand and NT$1,446,162 thousand for theyears ended December 31, 2014 and 2013.
No inventories were pledged.
(7) Investments accounted for using the equity methodDecember 31, 2014 December 31, 2013
Investees
Carrying
amount
Percentage of
ownership (%)
Carrying
amount
Percentage of
ownership (%)
Subsidiaries:
MediaTek Investment Singapore Pte. Ltd. $ 62,748,583 100 $ - -
MStar Semiconductor, Inc. 45,920,451 100 - -
MediaTek Investment Corp. - - 59,647,522 100
Hsu-Ta Investment Corp. 7,577,187 100 3,300,464 100
Ralink Technology Corp. - - 15,167,519 100
MediaTek Singapore Pte. Ltd. 10,139,643 100 6,336,283 100
T-Rich Technology (Cayman) Corp. 42,390 100 - -
Subtotal 126,428,254 84,451,788
Investments in Associates:
MStar Semiconductor, Inc. (Cayman) - - 58,192,878 48
Total $ 126,428,254 $ 142,644,666
A. The carrying amount of investments in the associates for which there were publishedprice quotations amounted to NT$0 and NT$58,192,878 thousand, as of December 31,2014 and 2013, respectively. The fair value of these investments were NT$0 andNT$88,178,143 thousand, as of December 31, 2014 and 2013, respectively.
MediaTek Inc. | 2014 Annual Report F-135
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The share of profit of subsidiaries and associates accounted for using the equity methodamounted to NT$14,292,618 thousand and NT$9,578,438 thousand for the years endedDecember 31, 2014 and 2013, respectively. The share of other comprehensive income ofsubsidiaries and associates accounted for using the equity method amounted toNT$1,123,022 thousand and NT$2,172,890 thousand for the years ended December 31,2014 and 2013, respectively.
In 2012, the Company totally acquired 254,115,685 shares (48% of MStar�s outstandingshares) of MStar Semiconductor, Inc. (Cayman) (�MStar�) through a tender offer. Theprice of the tender offer was 1 MStar share in exchange for 0.794 share of the Company�scommon stock plus NT$1 in cash. The Company aggregately issued 201,767,854 newshares and paid NT$254,116 thousand in cash for this tender offer. In January 2014, theCompany obtained de facto control over MStar. Therefore MStar was included in theconsolidation entities. In February 2014, the Company acquired the remaining 52%ownership of MStar by issuing 221,123,877 new shares and paying 278,494 thousand incash. After that, MStar was delisted and dissolved. The 100% ownership of MediaTekInvestment Singapore Pte. Ltd., which was previously owned by MStar, was thereforeassumed by the Company. Please refer to Note 6. (24) of the consolidated financialstatements for the year ended December 31, 2014 for more details on businesscombination.
For the purpose of reorganization, the 100% ownership of MStar Semiconductor, Inc.which was previously owend by MStar Semiconductor B.V. which was a subsidiary ofMediaTek Investment Singapore Pte. Ltd. was transferred to the Company in November2014.
For the purpose of reorganization, MediaTek Investment Corp. was dissolved due to themerger with MediaTek Investment Singapore Pte. Ltd. in April 2014.
For the purpose of reorganization, Ralink Technology Corp. was dissolved due to themerger with the Company in April 2014. The Company assumed 100% shares of T-RichTechnology (Cayman) Corp. and 11% shares of MediaTek USA Inc. which werepreviously owned by Ralink Technology Corp. Afterward, the Company transferred allshares of MediaTek USA Inc. to MTK Wireless Limited (UK) in April 2014.
No investment in the associate was pledged.
MediaTek Inc. | 2014 Annual Report F-136
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. The following table summarizes financial information of the Company�s investment inthe associates:
December 31, 2014
December 31, 2013
Total assets $ - $ 43,496,110Total liabilities $ - $ 10,004,750
For the years ended December 31 2014 2013
Revenue $ - $ 33,748,990Profit $ - $ 4,213,680
MediaTek Inc. | 2014 Annual Report F-137
Engl
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and
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fJan
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1, 2
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$88
8,72
2$
5,74
1,75
2$
57,5
36$
1,00
3,89
1$
2,26
6,11
9$
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$48
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-1,
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(49,
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(69,
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(72,
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$1,
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$7,
144,
963
$11
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$1,
354,
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$3,
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639
$17
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9$
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368
$13
,929
,681
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$88
8,72
2$
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2,53
1$
57,5
36$
895,
247
$2,
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$15
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6$
230,
146
$10
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,015
Add
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-2,
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-14
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8,20
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2,20
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5,97
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(16,
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$88
8,72
2$
5,74
1,75
2$
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36$
1,00
3,89
1$
2,26
6,11
9$
157,
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$48
5,55
8$
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01,2
74
MediaTek Inc. | 2014 Annual Report F-138
Engl
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$56
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$71
1,13
5$
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3,79
7$
146,
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$-
$4,
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Dep
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598
202,
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292,
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(49,
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(69,
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(72,
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$-
$1,
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$7,
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$84
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9$
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$56
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MediaTek Inc. | 2014 Annual Report F-139
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(9) Intangible Asset
SoftwarePatents, IPsand others Goodwill Total
Cost:As of January 1, 2014 $ 302,069 $ 788,346 $ 6,817,211 $ 7,907,626Additions-acquired separately 111,335 307,278 - 418,613Additions-acquired by merger 58 531,190 20,895,622 21,426,870Disposals (41,062) - - (41,062)Transfers 770 - - 770As of December 31, 2014 $ 373,170 $ 1,626,814 $ 27,712,833 $ 29,712,817
As of January 1, 2013 $ 615,623 $ 4,605,512 $ 6,817,211 $ 12,038,346Additions-acquired separately 58,460 259,895 - 318,355Disposals (374,449) (4,077,061) - (4,451,510)Transfers 2,435 - - 2,435As of December 31, 2013 $ 302,069 $ 788,346 $ 6,817,211 $ 7,907,626
Amortization and impairment:As of January 1, 2014 $ 206,948 $ 457,836 $ - $ 664,784Amortization 97,900 250,271 - 348,171Disposals (41,062) - - (41,062)As of December 31, 2014 $ 263,786 $ 708,107 $ - $ 971,893
As of January 1, 2013 $ 500,824 $ 4,497,535 $ - $ 4,998,359Amortization 80,573 37,362 - 117,935Disposals (374,449) (4,077,061) - (4,451,510)As of December 31, 2013 $ 206,948 $ 457,836 $ - $ 664,784
Net carrying amount as of:December 31, 2014 $ 109,384 $ 918,707 $ 27,712,833 $ 28,740,924
December 31, 2013 $ 95,121 $ 330,510 $ 6,817,211 $ 7,242,842
MediaTek Inc. | 2014 Annual Report F-140
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(10) Impairment testing of goodwillThe Company�s goodwill allocated to each of cash-generating units or groups ofcash-generating units is expected to benefit from synergies of the business combination. Keyassumptions used in impairment testing are as follows:
The recoverable amount of the cash-generating unit is determined based on the value-in-usecalculated using cash flow projections discounted by the pre-tax discount rate from financialbudgets approved by management covering a five-year period. The projected cash flowsreflect the change in demand for products and services. As a result of the analysis, theCompany did not identify any impairment for the goodwill of NT$27,712,833 thousand.
Key assumptions used in value-in-use calculationsThe calculation of value-in-use for the cash-generating unit is most sensitive to the followingassumptions:(a) Gross margin(b) Discount rates(c) Growth rates of sales of budget period
Gross margins - Gross margins are based on the gross margins of latest fiscal year and futuretrend of the market.
Discount rates - Discount rates reflect the current market assessment of the risks specific toeach cash generating unit (including the time value of money and the risks specific to theasset for which the future cash flow estimates have not been adjusted). The discount rate wasestimated based on the weighted average cost of capital (WACC) for the Company, takinginto account the particular situations of the Company and its operating segments. TheWACC includes both the cost of liabilities and cost of equity. The cost of equity is derivedfrom the expected returns of the Company�s investors on capital, where the cost of liabilitiesis measured by the interest bearing loans that the Company has obligation to settle.
Growth rates of sales estimates - The growth rate of sales were estimated by historicalexperience. The long-term average growth rate the Company predicted was adjusted byconsidering the product life cycle and the macroeconomic environment.
Sensitivity to changes in assumptionsWith regard to the assessment of value-in-use of the cash-generating unit, the Companybelieves that no reasonably possible change in any of the above key assumptions wouldcause the carrying value of the unit to materially exceed its recoverable amount.
MediaTek Inc. | 2014 Annual Report F-141
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(11) Short-term borrowingsDecember 31,
2014December 31,
2013Unsecured bank loans $ 30,290,690 $ 8,985,000
Interest rates 0.60-0.87% 0.80-0.95%
Unused lines of credits $ 37,892,449 $ 3,951,750
(12) Post-employment benefitsDefined contribution planThe Company adopts a defined contribution plan in accordance with the Labor Pension Actof the R.O.C. The Company has made monthly contributions of 6% of each individualemployee�s salaries or wages to employees� pension accounts.
Pension expenses under the defined contribution plan for the years ended December 31, 2014and 2013 were NT$390,087 thousand and NT$290,083 thousand, respectively.
Defined benefit planThe Company adopts a defined benefit plan in accordance with the Labor Standards Act ofthe R.O.C. The pension benefits are disbursed based on the units of service years and theaverage salaries in the last month of the service year. Two units per year are awarded for thefirst 15 years of services while one unit per year is awarded after the completion of the 15thyear. The total units shall not exceed 45 units. Under the Labor Standards Act, the Companycontributes an amount equivalent to 2% of the employees� total salaries and wages on amonthly basis to the pension fund deposited at the Bank of Taiwan in the name of theadministered pension fund committee.
The summarization of defined benefits plan reflected in profit or loss is as follows:For the years ended December 31
2014 2013Current service cost $ 1,956 $ 4,764Interest cost 13,510 8,956Expected return on plan assets (1,389) (907)Past service cost - -Total $ 14,077 $ 12,813
MediaTek Inc. | 2014 Annual Report F-142
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The cumulative amount of actuarial losses recognized in other comprehensive income isas follows:
For the years ended December 31 2014 2013
As of January 1 $ 156,698 $ 101,531Actuarial losses for the period 331,755 55,167As of December 31 $ 488,453 $ 156,698
Reconciliation of liability (asset) of the defined benefit plan is as follows:December 31,
2014December 31,
2013Defined benefit obligation at present value $ 1,023,110 $ 657,786Plan assets at fair value (73,180) (49,092)Accrued pension liabilities recognized on the
balance sheets $ 949,930 $ 608,694
Changes in present value of the defined benefit obligation are as follows:For the years ended December 31
2014 2013Defined benefit obligation as of January 1 $ 657,786 $ 597,086Current service cost 1,956 4,764Interest cost 13,510 8,956Effect of merger with subsidiaries 17,699 -Actuarial losses 332,159 54,912Benefits paid - (7,932)Defined benefit obligation as of December 31 $ 1,023,110 $ 657,786
Changes in fair value of plan assets are as follows:For the years ended December 31
2014 2013Fair value of plan assets as of January 1 $ 49,092 $ 51,843Expected return on plan assets 1,389 907Contributions by employer 1,934 1,864Effect of merger with subsidiaries 20,361 -Benefits paid - (7,932)Actuarial gains (losses) 404 (255)Others - 2,665Fair value of plan assets as of December 31 $ 73,180 $ 49,092
The Company expects to contribute NT$24,032 thousand to its defined benefit plan for theyear ended December 31, 2015.
MediaTek Inc. | 2014 Annual Report F-143
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The major categories of plan assets as a percentage of the fair value of total plan assets are asfollows:
Pension plan (%) as ofDecember 31,
2014December 31,
2013Cash 21.10% 26.96%Equity instruments 49.69% 44.77%Debt instruments 26.38% 27.48%Others 2.83% 0.79%
The Company�s actual return on plan assets was NT$1,793 thousand and NT$652 thousandfor the years ended December 31, 2014 and 2013.
Employee pension fund is deposited under a trust administered by the Bank of Taiwan. Theoverall expected rate of return on assets is determined based on historical trend and analyst�sexpectation on the asset�s return in its market over the obligation period. Furthermore, theutilization of the fund by the labor pension fund supervisory committee and the fact that theminimum earnings are guaranteed to be no less than the earnings attainable from the amountsaccrued from two-year time deposits with the interest rates offered by local banks are alsotaken into consideration in determining the expected rate of return on assets.
The principal assumptions used in determining the Company�s defined benefit plan areshown below:
December 31,2014
December 31,2013
Discount rate 2.25% 2.00%Expected rate of return on plan assets 2.25% 2.00%Expected rate of salary increases 4.50% 3.00%
A 0.5 percentage point change in discount rate on defined benefit obligation:For the years ended December 31
2014 20130.5% increase
in discount rate0.5% decreasein discount rate
0.5% increasein discount rate
0.5% decreasein discount rate
Effect on the aggregateservice cost in next period $ (258) $ 291 $ (189) $ 214
Effect on the defined benefitobligation $ (109,637) $ 124,103 $ (71,499) $ 81,112
MediaTek Inc. | 2014 Annual Report F-144
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company has elected to disclose amounts required by paragraph 120A(p) of IAS 19prospectively from the date of transition to TIFRS. The related account balances ofdefined benefit plan for the years ended 2014, 2013 and 2012 are as followings:
For the years ended December 31 2014 2013 2012
Defined benefit obligation atpresent value as of December 31 $ 1,023,110 $ 657,786 $ 597,086
Plan assets at fair value as ofDecember 31 (73,180) (49,092) (51,843)
Deficit in plan as of December 31 $ 949,930 $ 608,694 $ 545,243
Experience adjustments on planliabilities $ (50,075) $ (35,542) $ (16,434)
Experience adjustments on planassets $ 404 $ (255) $ (433)
(13) EquityA. Share capital
The Company�s authorized capital as of December 31, 2014 and 2013 wasNT$20,000,000 thousand, divided into 2,000,000,000 shares (including 20,000,000shares reserved for exercise of employee stock options at each period), each at a parvalue of NT$10. The Company�s issued capital was NT$15,714,455 thousand andNT$13,494,667 thousand, divided into 1,571,445,544 shares and 1,349,466,701 shares,as of December 31, 2014 and 2013, respectively. Each share has one voting right and aright to receive dividends.
In February 2014, the Company acquired the remaining 52% ownership of MStar byissuing 221,123,877 shares, each at a par value of NT$10. The Company has successfullyobtained relevant regulators approvals.
The Company totally issued 654,373 new shares and 333,580 new shares for the yearsended December 31, 2014 and 2013, respectively, at par value of NT$10 for theemployee stock options exercised. Furthermore, 46,700 shares (NT$467 thousand in theamount), and 247,293 shares (NT$2,473 thousand in the amount) were not yet registeredand therefore were classified as capital collected in advance as of December 31, 2014 and2013, respectively.
MediaTek Inc. | 2014 Annual Report F-145
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. Capital surplusDecember 31,
2014December 31,
2013Additional paid-in capital $ 85,824,767 $ 66,585,671Treasury share transactions 1,198,502 1,081,591The differences between the fair value of
the consideration paid or received fromacquiring or disposing subsidiaries andthe carrying amounts of the subsidiaries 149,965 149,965
Changes in ownership interests insubsidiaries 215,280 12,129
Donated assets 1,261 1,260From share of changes in net assets of
associates 68,650 51,144Employee stock options 465,777 401,842Others 123,712 191,308Total $ 88,047,914 $ 68,474,910
According to the Company Law, the capital surplus shall not be used except for offset thedeficit of the company. When a company incurs no loss, it may distribute the capitalsurplus generated from the excess of the issuance price over the par value of share capital(including the shares issued for mergers and the surplus from treasury shares transactions)and donations. The distribution could be made in cash or in the form of dividend sharesto its shareholders in proportion to the number of shares being held by each of them.
C. Treasury sharesAs of December 31, 2014 and 2013, the Company�s shares held by the subsidiary,MediaTek Capital Corp., were NT$55,970 thousand, and the number of the Company�sshares held were 7,794,085 shares. These shares held by MediaTek Capital Corp. wereacquired for the purpose of financing before the amendment of the Company Act onNovember 12, 2001.
As of December 31, 2014 and 2013, the Company did not hold any other treasury shares.
MediaTek Inc. | 2014 Annual Report F-146
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
D. Retained earnings and dividend policyAccording to the Company�s Articles of Incorporation, current year�s earnings, if any,shall be distributed in the following order:a. Income tax obligation;b. Offsetting accumulated deficits, if any;c. Legal reserve at 10% of net income after tax; where such legal reserve amounts to the
total authorized capital, this provision shall not apply.d. Special reserve in compliance with the Company Law or the Securities and Exchange
Law;e. Remuneration for directors and supervisors to a maximum of 0.5% of the remaining
current year�s earnings after deducting item (a) through (d). Remuneration fordirectors and supervisors� services is limited to cash payments.
f. The remaining after all above appropriations and distributions, combining withundistributed earnings from prior years, shall be fully for shareholders� dividends andemployees� bonuses and may be retained or distributed proportionally. The portion ofemployees� bonuses may not be less than 1% of total earnings resolved to distributefor shareholders� dividends and employees� bonuses. Employees� bonuses may bedistributed in the form of shares or cash, or a combination of both. Employees� of theCompany�s subsidiaries, meeting certain requirements determined by the board ofdirectors, are also eligible for the employees� stock bonuses.
Shareholders� dividends may be distributed in the form of shares or cash, or acombination of both, and cash dividends to be distributed may not be less than 10% oftotal dividends to be distributed.
According to the Company Law, the Company needs to set aside amount to legal reserveunless where such legal reserve amounts to the total authorized capital. The legal reservecan be used to offset the deficit of the Company. When the Company incurs no loss, itmay distribute the portion of legal reserve which exceeds 25% of the paid-in capital byissuing new shares or by cash in proportion to the number of shares being held by each ofthe shareholders.
Pursuant to existing regulations, the Company is required to set aside additional specialreserve equivalent to the net debit balance of the other components of shareholders�equity. For any subsequent reversal of other net deductions from shareholders� equity, theamount reversed may be distributed.
MediaTek Inc. | 2014 Annual Report F-147
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Following the adoption of TIFRS, the FSC on April 6, 2012 issued Order No.Financial-Supervisory-Securities-Corporate-1010012865, which sets out the followingprovisions for compliance:
On a public company's first-time adoption of the TIFRS, for any unrealized revaluationgains and cumulative translation adjustments (gains) recorded in shareholders� equity thatthe company elects to transfer to retained earnings by application of the exemption underIFRS 1, the company shall set aside an equal amount of special reserve. Following acompany�s adoption of the TIFRS for the preparation of its financial reports, whendistributing distributable earnings, it shall set aside special reserve based on differencebetween the amount already set aside and the total debit balances of other shareholders�equity. For any subsequent reversal of other net deductions from shareholders� equity, theamount reversed may be distributed.
As of January 1, 2013, special reserve set aside for the first-time adoption of TIFRSamounts to nil.
During the years ended December 31, 2014 and 2013, the amounts of the employees�bonuses were estimated to be NT$579,974 thousand and NT$1,593,476 thousand,respectively. During the years ended December 31, 2014 and 2013, the amounts ofremunerations to directors and supervisors were estimated to be NT$84,192 thousand andNT$56,784 thousand, respectively. The employees� bonuses were estimated based on aspecific rate of net income for the years ended December 31, 2014 and 2013 (excludingthe impact of employees� bonuses) while the remunerations to directors and supervisorswere estimated based on the Company�s Articles of Incorporation. Estimated amount ofemployees� bonuses and remunerations paid to directors and supervisors were charged tocurrent income. If the resolution of shareholders� general meeting modifies the estimatessignificantly in the subsequent year, the Company shall recognize the change as anadjustment to income of next year. If stock bonuses are resolved for distribution toemployees, the number of shares distributed is determined by dividing the amount ofbonuses by the closing price (after considering the effect of cash and stock dividends) ofshares on the day preceding the shareholders� meeting.
The appropriations of earnings for 2013 and 2012 were resolved by the board of directors�meeting on April 30, 2014 and May 10, 2013, while the appropriations of earnings for2013 and 2012 were resolved by general shareholders� meeting on June 12, 2014 andJune 21, 2013. The amounts resolved in the shareholders� general meeting wereconsistent with those determined by the board of directors.
MediaTek Inc. | 2014 Annual Report F-148
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Appropriation of earnings Dividend per share (NT$)2013 2012 2013 2012
Legal reserve $ 2,751,505 $ 1,568,753 - -Special reserve (reversal) (4,176,676) 2,862,113 - -Cash dividends-common stock 23,565,323 674,690 $ 15.00 $ 0.50Directors� and supervisors�
remunerations 57,880 28,141 - -Employees� bonuses-cash 1,593,476 895,875 - -Total $ 23,791,508 $ 6,029,572
On May 10, 2013, the board of directors resolved a cash distribution of NT$9.0 per share(NT$12,144,424 thousand in the amount), among which NT$8.5 per share(NT$11,469,734 thousand in the amount) is from capital surplus while the remaining isfrom earnings. The cash distribution was approved by the shareholders� meeting on June21, 2013.
The difference between the resolution of the shareholders� general meeting and theestimated expense of the directors� and supervisors� remuneration and the employees�bonuses for 2013 are as follows:
Appropriations
The amountresolved by the
board of directorsmeeting
Expenseestimated Difference
Differencereasons and
the accountingtreatment
Employees� bonuses-cash $ 1,593,476 $ 1,593,476 $ - -Directors� and supervisors�
remunerations $ 57,880 $ 56,784 $ 1,096 (Note)Note: The difference, which was resulted from different calculation basis between the original accrual and
the amount actually paid, was adjusted in the profit or loss in 2014.
The information about the appropriations of earnings resolved by the board of directors�meeting and shareholders� meeting is available at the Market Observation Post Systemwebsite.
MediaTek Inc. | 2014 Annual Report F-149
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
E. Other equityExchange differences
resulting from translatingthe financial statements
of foreign operations
Unrealized gainsfrom
available-for-salefinancial assets Total
As of January 1, 2014 $ (2,404,641) $ 1,508,892 $ (895,749)Exchange differences resulting
from translating the financialstatements of foreignoperations 6,645,482 - 6,645,482
Unrealized gains fromavailable-for-sale financialassets - (263,561) (263,561)
Share of other comprehensiveincome of subsidiaries andassociates accounted for usingequity method (22,549) 1,142,490 1,119,941
As of December 31, 2014 $ (4,218,292) $ 2,387,821 $ 6,606,113
Exchange differencesresulting from translatingthe financial statements
of foreign operations
Unrealized gainsfrom
available-for-salefinancial assets Total
As of January 1, 2013 $ (5,762,485) $ 579,111 $ (5,183,374)Exchange differences resulting
from translating the financialstatements of foreignoperations 1,813,956 - 1,813,956
Unrealized gains fromavailable-for-sale financialassets - 297,789 297,789
Unrealized gains reclassified toprofit or loss upon disposal ofavailable-for-sale financialassets - 16,113 16,113
Share of other comprehensiveincome of subsidiaries andassociates accounted for usingequity method 1,543,888 615,879 2,159,767
As of December 31, 2013 $ (2,404,641) $ 1,508,892 $ (895,749)
MediaTek Inc. | 2014 Annual Report F-150
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(14) Share-based payment plansCertain employees of the Company are entitled to share-based payment as part of theirremunerations. Services are provided by the employees in return for the equity instrumentsgranted. These plans are accounted for as equity-settled share-based payment transactions.
In December 2007, July 2009, May 2010, August 2011, August 2012 and August 2013, theCompany was authorized by the Financial Supervisory Commission, Executive Yuan, toissue employee stock options of 5,000,000 units, 3,000,000 units, 3,500,000 units, 3,500,000units, 3,500,000 units and 3,500,000 units, respectively, each unit eligible to subscribe forone common share. The options may be granted to qualified employees of the Company orany of its domestic or foreign subsidiaries, in which the Company�s shareholding with votingrights, directly or indirectly, is more than fifty percent. The options are valid for ten yearsand exercisable at certain percentage subsequent to the second anniversary of the granteddate. Under the terms of the plan, the options are granted at an exercise price equal to theclosing price of the Company�s common shares listed on the TWSE on the grant date.
Detail information relevant to the share-based payment plan is disclosed as follows:
Date of grantTotal number ofoptions granted
Total number ofoptions outstanding
Shares available foroption holders
Exercise price(NT$) (Note)
2008.03.31 1,134,119 299,326 299,326 $ 358.02008.08.28 1,640,285 490,164 490,164 344.52009.08.18 1,382,630 584,549 584,549 429.52010.08.27 1,605,757 728,645 728,645 404.82010.11.04 65,839 14,634 14,634 377.02011.08.24 2,109,871 1,272,697 652,384 277.42012.08.14 1,346,795 1,059,040 284,845 286.82013.08.22 1,436,343 1,305,943 - 368.0
Note: The exercise prices have been adjusted to reflect the change of outstanding shares (i.e. the share issuedfor cash, the appropriations of earnings, issuance of new shares in connection with merger, or issuance ofnew shares to acquire shares of other companies) in accordance with the plan.
The compensation cost was recognized under the fair value method and the Black-ScholesOption Pricing model was used to estimate the fair value of options granted. Assumptionsused in calculating the fair value are disclosed as follows:
Employee Stock OptionExpected dividend yield (%) 2.43%~6.63%Expected volatility (%) 32.9%~50.06%Risk free interest rate (%) 0.93%~2.53%Expected life (Years) 6.5 years
MediaTek Inc. | 2014 Annual Report F-151
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The expected life of the share options is based on historical data and current expectations andis not necessarily indicative of exercise patterns that may occur. The expected volatilityreflects the assumption that the historical volatility over a period similar to the life of theoptions is indicative of future trends, which may also not necessarily be the actual outcome.
The following table contains further details on the aforementioned share-based paymentplan:
For the years ended December 31
2014 2013
Employee Stock OptionOptions(Unit)
Weighted-averageExercise Price per
Share (NT$)Options(Unit)
Weighted-averageExercise Price per
Share (NT$)
Outstanding at beginning of year 6,641,191 $ 341.3 6,045,493 $ 332.7Granted - - 1,436,343 368.0Exercised (654,373) 340.8 (285,885) 314.6Forfeited (Expired) (231,820) 335.6 (554,760) 289.1
Outstanding at end of year 5,754,998 341.4 6,641,191 341.3
Exercisable at end of year 3,054,547 2,599,022
Weighted-average fair value ofoptions granted during the year(in NT$) $ - $ 96.5
The weighted average share price at the date of exercise of those options were NT$472.3and NT$397.3 for the years ended December 31, 2014 and 2013.
The information on the outstanding share-based payment plan as of December 31, 2014 and2013 is as follows:
December 31, 2014 December 31, 2013
Outstanding stock options Outstanding stock options
Date of grantRange of Exercise
Price (NT$)
Weighted-average
ExpectedRemaining
Years
Weighted-average
Exercise Priceper Share
(NT$)
Weighted-average
ExpectedRemaining
Years
Weighted-average
Exercise Priceper Share
(NT$)
2007.12.19 $ 344.5~358.0 0.10 $ 349.6 1.00 $ 349.8
2009.07.27 429.5 1.13 429.5 2.13 431.0
2010.05.10 377.0~404.8 2.17 404.3 3.17 404.3
2011.08.09 277.4 3.17 277.4 4.17 277.4
2012.08.09 286.8 4.13 286.8 5.13 286.8
2013.08.09 368.0 5.17 368.0 6.17 368.0
MediaTek Inc. | 2014 Annual Report F-152
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company issued new shares to exchange 100% shares of Ralink Technology Corp. onOctober 1, 2011. According to the share-swap agreement, the Company also issued its ownstock options to replace Ralink�s stock options. The original terms of Ralink�s options remainexcept for the changes: a) the underlying shares have been changed to the Company�s shares;and b) the number of shares each option can subscribe for has been changed according to theshare exchange ratio stated in the share-swap agreement.
The employee stock options issued by the Company to replace Ralink�s share-based paymentall expired in 2013.
Details of Ralink�s share-based payment plan to be replaced are shown below:
Date of grant
Totalnumber of
optionsgranted
Total numberof options
outstandingon the shares
exchangedate
Total number ofoptions outstandingtranslated by shareexchange ratio on
the shares exchangedate
Totalnumber of
optionsoutstanding
Sharesavailablefor option
holders
Exerciseprice
(NT$)(Note)
2006.06.30 91,000 1,575 499 - - $14.32006.09.30 599,500 9,763 3,092 - - 14.32006.12.31 78,000 3,936 1,247 - - 14.32007.03.31 273,000 11,967 3,791 - - 15.72007.06.30 150,000 32,879 10,416 - - 15.72007.09.30 560,000 149,568 47,368 - - 15.72007.12.30 17,000 944 299 - - 15.72007.12.31 1,000,000 277,490 87,895 - - 16.7
Note: The exercise prices have been adjusted to reflect the change of outstanding shares (i.e. the share issued forcash or the appropriations of earnings) in accordance with the plan.
The Black-Scholes Option Pricing model was used to estimate the fair value of optionsgranted to replace Ralink�s options. Assumptions used in calculating the fair value aredisclosed as follows:
Employee Stock Option
Expected dividend yield (%) 6.57%Expected volatility (%) 39.5%Risk free interest rate (%) 0.71%~0.86%Expected life (Years) 0.75 year
MediaTek Inc. | 2014 Annual Report F-153
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The aforementioned expected option life is based on historical data of period for previouslygranted options and current expectations are not necessarily indicative of exercise patterns thatmay occur. The expected volatility reflects the assumption that the historical volatility over aperiod similar to the life of the options is indicative of future trends, which may also notnecessarily be the actual outcome.
The weighted-average exercise price of the options granted to replace Ralink�s options isdisclosed as follows:
For the year ended December 31, 2013
Employee Stock OptionOptions(Unit)
Weighted-averageExercise Price per
Share (NT$)Outstanding at beginning of year 52,483 $16.4Granted - -Exercised (47,695) 16.4Forfeited (Expired) (4,788) 16.2Outstanding at end of year - -Exercisable at end of year -Weighted-average fair value of options granted
during the year (in NT$) $ -
The weighted average share price at the date of exercise of those options was NT$347.6 forthe year ended December 31, 2013.
The information on the outstanding share-based payment plan as of December 31, 2013 is asfollows:
As of December 31, 2013Outstanding stock options
Date of grantRange of Exercise
Price (NT$)
Weighted- averageExpected
Remaining Years
Weighted- averageExercise Price per Share
(NT$)2007.01.29 $15.7 - $15.72007.10.30 16.7 - 16.7
The expense recognized for employee services received for the years ended December 31,2014 and 2013 is shown in the following table:
For the years ended December 31 2014 2013
Total equity-settled transactions $ 63,935 $ 75,799
MediaTek Inc. | 2014 Annual Report F-154
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
There have been no cancellations or modifications to any of the plans during the years endedDecember 31, 2014 and 2013.
(15) SalesFor the years ended December 31
2014 2013Sale of goods $ 163,108,288 $ 111,866,310Other operating revenues 2,051,016 1,307,015Less: Sales returns and discounts (28,894,286) (16,943,261)Net sales $ 136,265,018 $ 96,230,064
(16) Summary of employee benefits, depreciation and amortization expenses by function for theyears ended December 31, 2014 and 2013:
For the years ended December 31 2014 2013
Operatingcosts
Operatingexpenses
TotalOperating
costsOperatingexpenses
Total
Employee benefits expenseSalaries $ 243,369 $ 18,254,215 $18,497,584 $ 179,423 $ 10,544,511 $ 10,723,934Labor and health insurance $ 18,190 $ 627,305 $ 645,495 $ 17,371 $ 450,694 $ 468,065Pension $ 11,318 $ 392,846 $ 404,164 $ 10,219 $ 292,677 $ 302,896Others $ 6,389 $ 292,644 $ 299,033 $ 5,755 $ 203,227 $ 208,982
Depreciation $ 3,147 $ 692,039 $ 695,186 $ 2,791 $ 573,328 $ 576,119Amortization $ - $ 348,171 $ 348,171 $ - $ 117,935 $ 117,935
(17) Other incomeFor the years ended December 31
2014 2013Rental income $ 18,529 $ 10,527Interest income 1,024,947 397,445Dividend income 62,698 48,197Others 95,098 137,426Total $ 1,201,272 $ 593,595
MediaTek Inc. | 2014 Annual Report F-155
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(18) Other gains and lossesFor the years ended December 31
2014 2013Losses on disposal of property, plant and
equipment $ (210) $ (445)Gains (losses) on disposal of investments
Available-for-sale financial assets - (16,113)Bond investments for which no activemarket exists 1,354 -
Investment accounted for using the equity method 8,732 -Foreign exchange gains 881,374 325,504Gain (loss) on financial assets at fair value through
profit or loss 21,104 (36,433)Losses on financial liabilities at fair value through
profit or loss (2,595) (26,017)Others - (2,535)Total $ 909,759 $ 243,961
(19) Finance costsFor the years ended December 31
2014 2013Interest expenses on short-term borrowings $ 170,523 $ 20,981
(20) Income taxThe major components of income tax expense are as follows:
For the years ended December 31
2014 2013Current income tax $ 5,049,951 $ 2,799,749Deferred tax income (1,445,013) (996,027)Others 97,473 (111,269)Income tax expense recognized in profit or loss $ 3,702,411 $ 1,692,453
MediaTek Inc. | 2014 Annual Report F-156
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
A reconciliation between tax expense and the product of accounting profit multiplied byapplicable tax rates is as follows:
For the years ended December 312014 2013
Accounting profit before tax from continuing operations $ 50,100,303 $ 29,207,505Tax at the domestic rates applicable to profits in the
country concerned $ 8,517,052 $ 4,965,276Tax effect of revenues exempt from taxation (2,099,422) (1,679,665)Tax effect of expenses not deductible for tax purposes (2,196,984) (1,366,249)Investment tax credits (537,490) (1,058,197)Tax effect of deferred tax assets/liabilities (482,457) 166,46810% surtax on undistributed retained earnings 537,490 1,058,197Others (35,778) (393,377)Total income tax expense recognized in profit or loss $ 3,702,411 $ 1,692,453
For the year ended December 31, 2014
Beginningbalance
Recognizedin profit or
loss
Recognized inother
comprehensiveincome
Chargeddirectly to
equityExchange
differencesEndingbalance
Temporary differencesUnrealized allowance for
inventory obsolescence $ 351,814 $ 389,300 $ - $ - $ - $ 741,114Allowance for sales
returns and discounts 694,318 544,671 - - - 1,238,989Amortization of difference
for tax purpose 112,901 104,298 - - - 217,199Amortization of goodwill
difference for taxpurpose (870,081) 250,841 - - - (619,240)
Others (10,389) 155,903 56,399 - - (201,913)Deferred tax income $ 1,445,013 $ 56,399 $ - $ -
Net deferred tax assets $ 278,563 $ 1,779,975
Reflected in balance sheet asfollows:
Deferred tax assets $ 1,148,644 $ 2,400,152
Deferred tax liabilities $ (870,081) $ (620,177)
MediaTek Inc. | 2014 Annual Report F-157
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
For the year ended December 31, 2013
Beginningbalance
Recognizedin profit or
loss
Recognized inother
comprehensiveincome
Chargeddirectly to
equityExchange
differencesEndingbalance
Temporary differencesUnrealized allowance for
inventory obsolescence $ 27,183 $ 324,631 $ - $ - $ - $ 351,814Allowance for sales
returns and discounts 29,463 664,855 - - - 694,318Amortization of difference
for tax purpose 35,178 77,723 - - - 112,901Amortization of goodwill
difference for taxpurpose (1,158,925) 288,844 - - - (870,081)
Unused tax credits 364,189 (364,189) - - - -Others (14,552) 4,163 - - - (10,389)Deferred tax income $ 996,027 $ - $ - $ -
Net deferred taxassets(liabilities) $ (717,464) $ 278,563
Reflected in balance sheetas follows:
Deferred tax assets $ 470,085 $ 1,148,644
Deferred tax liabilities $ (1,187,549) $ (870,081)
Integrated income tax informationDecember 31,
2014December 31,
2013Balance of the imputation credit account $ 7,667,187 $ 1,892,716
The estimated and actual creditable ratios for 2014 and 2013 were 11.71% and 4.34%,respectively.
The Company�s earnings generated prior to December 31, 1997 have been fullyappropriated.
The tax authorities have assessed income tax returns of the Company through 2012. For thetax returns of 2012, 2011, 2010, 2009 and 2008 of the Company, the tax authorities haveassessed additional taxes. The discrepancy between the Company�s tax return filing and theresult of tax authority�s assessment was mainly due to different interpretations by applyingrules. Although the Company has vigorously file several administrative appeals to taxauthorities and courts, the Company paid the amount in full.
MediaTek Inc. | 2014 Annual Report F-158
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
(21) Earnings per shareBasic earnings per share is calculated by dividing net profit for the year attributable toordinary equity owners of the Company by the weighted average number of ordinary sharesoutstanding during the year.
Diluted earnings per share is calculated by dividing the net profit attributable to ordinaryequity owners of the Company by the weighted average number of ordinary sharesoutstanding during the year plus the weighted average number of ordinary shares that wouldbe issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
For the years ended December 312014 2013
A. Basic earnings per shareProfit (in thousand NT$) $ 46,397,892 $ 27,515,052Weighted average number of ordinary shares outstanding
for basic earnings per share (share) 1,544,565,142 1,341,660,900Basic earnings per share (NT$) $ 30.04 $ 20.51
For the years ended December 312014 2013
B. Diluted earnings per shareProfit (in thousand NT$) $ 46,397,892 $ 27,515,052Weighted average number of ordinary shares outstanding
for basic earnings per share (share) 1,544,565,142 1,341,660,900Effect of dilution:Employee bonuses-stock (share) 2,695,764 4,851,460Employee stock options (share) 1,637,031 652,161Weighted average number of ordinary shares outstanding
after dilution (share) 1,548,897,937 1,347,164,521Diluted earnings per share (NT$) $ 29.96 $ 20.42
There have been no other transactions involving ordinary shares or potential ordinary sharesbetween the reporting date and the date of completion of the financial statements.
MediaTek Inc. | 2014 Annual Report F-159
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
7. Related Party Transactions(1) Significant transactions with related parties
A. SalesFor the years ended December 31
2014 2013Subsidiaries $ 613,123 $ 506,335Associates 3,577 -Total $ 616,700 $ 506,335
For the years ended December 31, 2014 and 2013, the trade credit terms for relatedparties and third-party customers were both 45 to 60 days. Third-party customers maypay their accounts in advance. Above sales include royalty revenues, which were chargedbased on the royalty agreement.
B. IC testing, experimental services, and manufacturing technology servicesFor the years ended December 31
2014 2013Other related parties $ 1,739,287 $ 1,610,995
C. Consign research and development expense and license expenseFor the years ended December 31
2014 2013Subsidiaries $ 1,885,556 $ -Associates 200,000 -Other related parties 30,133 26,807Total $ 2,115,689 $ 26,807
D. Rental incomeFor the years ended December 31
2014 2013Subsidiaries $ 6,432 $ 840Associates 714 500Other related parties 8,606 9,187Total $ 15,752 $ 10,527
NT$876 thousand was received from other related parties, which was accounted for asdeposits received due to a lease of office space.
MediaTek Inc. | 2014 Annual Report F-160
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
E. Other income due to technology serviceFor the years ended December 31
2014 2013Subsidiaries $ 56,777 $ 11,951
F. Endorsement amount for office lease, bank financing and IP purchasingAs of December 31, 2014 As of December 31, 2013
Endorsementlimit
Actualamount
Endorsementlimit
Actualamount
Subsidiaries $ 33,057,300 $ 11,428,203 $ 24,133,185 $ 18,402,685
G. Trade receivables from related partiesDecember 31,
2014December 31,
2013Subsidiaries $ 179,720 $ 160,054
H. Other receivables from related partiesDecember 31,
2014December 31,
2013Subsidiaries $ 1,146,847 $ 1,063,022Associates 150 60Other related parties - 340Total $ 1,146,997 $ 1,063,422
Other receivables from related parties are composed mainly of rent receivables anddividends receivables.
I. Trade payables to related partiesDecember 31,
2014December 31,
2013Other related parties $ 419,512 $ 433,716
J. Other payables to related partiesDecember 31,
2014December 31,
2013Subsidiaries $ 2,971,830 $ -
MediaTek Inc. | 2014 Annual Report F-161
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company borrowed funds from related parties. Additional disclosures consisted ofthe following:
Date IncurredMaximumBalance
EndingBalance
InterestRate
Subsidiaries 2014/9 $ 1,840,504 $ 1,840,504 1.25%
K. Key management personnel compensationFor the years ended December 31
2014 2013Short-term employee benefits (Note) $ 597,844 $ 480,520Post-employment benefits 972 1,035
Total $ 598,816 $ 481,555
Note: The Company estimated the management personnel compensation of short-term employee benefits
based on the accrued bonuses and the actual proportion of earning appropriation in the past.
8. Assets Pledged as CollateralThe following table lists assets of the Company pledged as security:
Carrying amount
Assets pledged for securityDecember 31,
2014December 31,
2013 Purpose of pledge
Bond investments for which no activemarket exists-current $ 7,067 $ 6,917 Land lease guarantee
Bond investments for which no activemarket exists-current 3,142 3,104 Customs clearance deposits
Bond investments for which no activemarket exists-current - 102,000 Project performance deposits
Total $ 10,209 $ 112,021
9. Contingencies and Off Balance Sheet Commitments(1) Operating lease commitments-the Company as lessee
The Company has entered into commercial leases, and these leases have an average life ofthree to ten years with no renewal options included in the contracts. There are no restrictionsplaced upon the Company by entering into these leases.
MediaTek Inc. | 2014 Annual Report F-162
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Future minimum rentals payable under non-cancellable operating leases are as follows:December 31,
2014December 31,
2013Not later than one year $ 30,774 $ 30,371Later than one year and not later than five years 123,096 121,484Later than five years 124,576 153,306Total $ 278,446 $ 305,161
(2) Legal claim contingencyA. Azure Networks, LLC (�Azure�) and Tri-County Excelsior Foundation (�TCEF�) filed a
complaint in the United States District Court for the Eastern District of Taxes againstRalink and Ralink Technology Corporation (USA), along with other defendants in March2011, alleging infringement of United States Patent No. 7,756,129. On April 6, 2012,Azure and TCEF filed a complaint in the United States District Court for the EasternDistrict of Texas against the Company alleging infringement of the same patentreferenced above. On May 30, 2013, the Court entered a judgment in favor of Ralink andother defendants, dismissing the earlier case subject to the plaintiffs� right to appeal. Anappeal has been filed by plaintiffs on June 20, 2013. On November 6, 2014, the UnitedStates Court of Appeals for the Federal Circuit vacated the lower court�s judgment andremanded the case to the district court. The court dismissed the claims against Ralinkpursuant to Azure and Ralink�s joint motion on February 10, 2015. On June 10, 2013, theCourt entered a judgment dismissing the latter case pursuant to the parties' jointstipulation.
Additionally, on January 13, 2015, Azure filed a complaint in the United States DistrictCourt for the Eastern District of Texas against the Company and subsidiary MediaTekUSA Inc. alleging infringement of United States Patent Nos. 7,756,129, 8,582,570,8,582,571, 8,588,196, 8,588,231, 8,589,599, 8,675,590, 8,683,092 and 8,732,347 by theCompany�s wireless communications, tablet and mobile phone chips, and seekingdamages. The operations of the Company and subsidiary MediaTek USA Inc. would notbe materially affected by this case.
B. Commonwealth Scientific and Industrial Research Organization filed a complaint in theUnited States District Court for the Eastern District of Texas against the Company andsubsidiaries MediaTek USA Inc., Ralink, and Ralink Technology Corporation (USA),along with other defendants on August 27, 2012 alleging infringement of United StatesPatent No. 5,487,069. The operations of the Company and subsidiary MediaTek USA Inc.would not be materially affected by this case.
MediaTek Inc. | 2014 Annual Report F-163
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
C. Palmchip Corporation (�Palmchip�) filed a complaint in the Superior Court of Californiain the County of Santa Clara against the Company and subsidiaries MediaTek USA Inc.,Ralink and Ralink Technology Corporation (USA) on October 19, 2012, asserting claimsof breach of contract. The operations of the Company and subsidiary MediaTek USA Inc.would not be materially affected by this case.
Palmchip filed a complaint in the United States District Court for the Central District ofCalifornia against the Company and subsidiaries MediaTek USA Inc., Ralink, and RalinkTechnology Corporation (USA) on August 30, 2013, alleging infringement of UnitedStates Patents Nos. 6,601,126, 6,769,046, and 7,124,376. The operations of the Companyand subsidiary MediaTek USA Inc. would not be materially affected by this case.
D. Optical Devices, LLC (�Optical Devices�) filed a complaint with the U.S. InternationalTrade Commission (the �Commission�) against the Company and subsidiary MediaTekUSA Inc. on September 3, 2013 alleging infringement of United States Patent No.8,416,651. Optical Devices alleged that the Company�s optical disc drive chips infringe itspatent and sought to prevent the accused products from being imported into the UnitedStates. The Commission issued an Initial Determination on July 17, 2014 finding thatOptical Devices failed to meet the domestic industry requirement and terminating theinvestigation. On September 3, 2014, the Commission vacated the Initial Determinationand remanded the case for further proceedings. On October 21, 2014, the Commissionissued an Initial Determination to terminate the investigation on the ground that OpticalDevices� lack of standing. On December 4, 2014, the Commission partially vacated theInitial Determination and remanded a part of the case including the investigation againstthe Company for further proceedings. The operations of the Company and subsidiaryMediaTek USA Inc. would not be materially affected by this case.
Also on September 3, 2013, Optical Devices filed a complaint in the United States DistrictCourt for the District of Delaware against the Company and subsidiary MediaTek USAInc., alleging that the Company�s optical disc drive chips infringe the above referencedpatent. The operations of the Company and subsidiary MediaTek USA Inc., would not bematerially affected by this case.
E.Vantage Point Technology, Inc. filed a complaint in the United States District Court forthe Eastern District of Texas against subsidiary MediaTek USA Inc. on November 21,2013, alleging infringement of United States Patent Nos. 5,463,750 and 6,374,329. Theoperations of the Company and subsidiary MediaTek USA Inc. would not be materiallyaffected by this case.
MediaTek Inc. | 2014 Annual Report F-164
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
F.Bandspeed Inc. filed a complaint in the United States District Court for the WesternDistrict of Texas against the Company, subsidiary MediaTek USA Inc. and otherdefendants on May 9, 2014, alleging infringement of United States Patent Nos. 7,027,418,7,570,614. 7,477,624, 7,903,608 and 8,542,643. On October 17, 2014, the court grantedthe parties joint stipulation to dismiss the claims against the Company, all other claimsagainst other parties including those against subsidiary MediaTek USA Inc. remainpending. On February 13, 2015, the court granted Bandspeed�s motion for leave to file aFirst Amended Complaint to add United States Patent No. 8,873,500 to the case. Theoperations of the Company and subsidiary MediaTek USA Inc. would not be materiallyaffected by this case.
G.Adaptive Data LLC (�Adaptive Data�) filed a complaint in the United States DistrictCourt for the District of Delaware against subsidiary MediaTek USA Inc. on December31, 2014, alleging infringement of United States Patent Nos. 6,108,347 and 6,243,391 bythe Bluetooth chips of subsidiary MediaTek USA Inc. and seeking damages. This casehas been settled and Adaptive Data voluntarily dismissed the case on February 19, 2015.
H. Luciano F. Paone filed a complaint in the United States District Court for the EasternDistrict of New York against subsidiary MediaTek USA Inc. on February 9, 2015,alleging infringement of United States Patent No. 6,259,789. The operations of theCompany and subsidiary MediaTek USA Inc. would not be materially affected by thiscase.
I. Innovatio IP Ventures, LLC (�Innovatio�) filed a complaint in the United States DistrictCourt for the Northern District of Illinois against subsidiary MediaTek USA Inc. onMarch 16, 2015, alleging infringement of United States Patent Nos. 6,697,415,5,844,893, 5,740,366, 7,916,747, 6,665,536, 7,013,138, 7,107,052, 5,546,397, 7,710,907,7,710,935, 6,714,559, 7,457,646 and 6,374,311. The operations of the Company andsubsidiary MediaTek USA Inc. would not be materially affected by this case.
The Company will handle these cases carefully.
10. Losses due to Major DisastersNone
11. Significant Subsequent EventsNone
MediaTek Inc. | 2014 Annual Report F-165
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
12. Others(1) Financial instruments
A. Categories of financial instrumentsFinancial assets
December 31, 2014
December 31, 2013
Financial assets at fair value through profit or loss:Held for trading financial assets $ 1,871 $ 7,420Financial assets designated upon initial recognition at
fair value through profit or loss 1,090,775 310,387Subtotal 1,092,646 317,807
Available-for-sale financial assets 4,692,687 4,410,214Loans and receivables:
Cash and cash equivalents (excluding cash on handand petty cash) 127,448,149 53,710,940
Bond investments for which no active market exists 308,133 112,021Trade receivables (including related parties) 3,954,943 4,273,902Other receivables 5,104,465 3,189,179Subtotal 136,815,690 61,286,042
Total $ 142,601,023 $ 66,014,063
Financial liabilitiesDecember 31,
2014December 31,
2013Financial liabilities at fair value through profit or loss:
Held for trading financial liabilities $ 2,595 $ 26,017
Financial liabilities at amortized cost:Short-term borrowings 30,290,690 8,985,000Trade payables (including related parties) 7,171,345 7,256,336Other payables 26,714,011 13,545,923Long-term payables (including current portion) 91,982 -Subtotal 64,268,028 29,787,259
Total $ 64,270,623 $ 29,813,276
MediaTek Inc. | 2014 Annual Report F-166
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
B. Fair values of financial instrumentsa. The methods and assumptions applied in determining the fair value of financial
instruments:The fair value of the financial assets and liabilities are included at the amount at whichthe instrument could be exchanged in a current transaction between willing parties, otherthan in a forced or liquidation sale. The following methods and assumptions were used toestimate the fair values:
(a) The carrying amount of cash and cash equivalents, trade receivables (includingrelated parties), other receivables, short-term borrowings, trade payables (includingrelated parties), other payables approximate their fair value due to their shortmaturities.
(b) For financial assets and liabilities traded in an active market with standard terms andconditions, their fair value is determined based on market quotation price (includinglisted equity securities and bonds) at the reporting date.
(c) The fair value of derivative financial instrument is based on market quotations. Forunquoted derivatives that are not options, the fair value is determined based ondiscounted cash flow analysis using interest rate yield curve for the contract period.Fair value of option-based derivative financial instruments is obtained using theoption pricing model.
(d) The fair value of other financial assets and liabilities is determined using discountedcash flow analysis, the interest rate and discount rate are selected with reference tothose of similar financial instruments.
b. Fair value of financial instruments measured at amortized costOther than those listed in the table below, the carrying amount of the Company�sfinancial assets and liabilities measured at amortized cost approximate their fair value.
c. Assets measured at fair valueThe following table contains the fair value of financial instruments after initialrecognition and the details of the three levels of fair value hierarchy:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a significant effect on therecorded fair value are observable, either directly or indirectly.
MediaTek Inc. | 2014 Annual Report F-167
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Level 3: Techniques which use inputs which have a significant effect on the recordedfair value that are not based on observable market data.
As of December 31, 2014
Level 1 Level 2 Level 3 Total
Financial assets:Financial assets at fair value through
profit or lossDerivative financial instruments $ - $ 1,871 $ - $ 1,871
Linked deposits - - 1,090,775 1,090,775
Available-for-sale financial assets
Depositary receipts 28,010 - - 28,010Stocks 632,583 - - 632,583
Funds 4,032,094 - - 4,032,094
Total $ 4,692,687 $ 1,871 $ 1,090,775 $ 5,785,333
Financial liabilities
Financial liabilities at fair value throughprofit or loss
Derivative financial instruments $ - $ 2,595 $ - $ 2,595
As of December 31, 2013Level 1 Level 2 Level 3 Total
Financial assets:Financial assets at fair value through
profit or lossBonds $ 35,000 $ - $ - $ 35,000Derivative financial instruments - 7,420 - 7,420Linked deposits - - 275,387 275,387
Available-for-sale financial assetsDepositary receipts 22,577 - - 22,577Stocks 749,459 - - 749,459Funds 3,638,178 - - 3,638,178
Total $ 4,445,214 $ 7,420 $ 275,387 $ 4,728,021
MediaTek Inc. | 2014 Annual Report F-168
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
As of December 31, 2013Level 1 Level 2 Level 3 Total
Financial liabilitiesFinancial liabilities at fair value through
profit or lossDerivative financial instruments $ - $ 26,017 $ - $ 26,017
For the years ended December 31, 2014 and 2013, there were no transfers between Level1 and Level 2.
Reconciliation for fair value measurements in Level 3 of the fair value hierarchy is asfollows:
Financial assets at fair value through profit or loss- linked depositsFor the years ended December 31
2014 2013As of January 1 $ 275,387 $ 50,129Amount recognized in profit or loss 388 258Acquisitions 880,000 875,000Settlements (65,000) (650,000)As of December 31 $ 1,090,775 $ 275,387
Total profits or losses recognized for the years ended December 31, 2014 and 2013contained profits related to linked deposits on hand as of December 31, 2014 and 2013 inthe amount of NT$441 thousand and NT$387 thousand, respectively.
C. Derivative financial instrumentsThe Company�s derivative financial instruments held for trading were forward exchangecontracts. The related information is as follows:
The Company entered into forward exchange contracts to manage its exposure to financialrisk, but these contracts are not designated as hedging instruments. The table below lists theinformation related to forward exchange contracts:
Forward exchange contracts CurrencyContract amount
(�000) MaturityAs of December 31, 2014 TWD to USD Sell USD105,000 February 2015As of December 31, 2013 TWD to USD Sell USD190,000 January 2014
MediaTek Inc. | 2014 Annual Report F-169
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The Company entered into forward foreign exchange contracts to hedge foreign currencyrisk of net assets or net liabilities. As there will be corresponding cash inflows or outflowsupon maturity and the Company has sufficient operating funds, the cash flow risk isinsignificant.
(2) Financial risk management objectivesThe Company�s principal financial risk management objective is to manage the market risk,credit risk and liquidity risk related to its operating activities. The Company identifies,measures and manages the aforementioned risks based on the Company�s policy and risktendency.
The Company has established appropriate policies, procedures and internal controls forfinancial risk management. The plans for material treasury activities are reviewed by Board ofDirectors in accordance with relevant regulations and internal controls. The Company complieswith its financial risk management policies at all times.
A. Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of the changes in market prices. Market prices comprise foreign currencyrisk, interest rate risk and other price risk.
In practice, it is rarely the case that a single risk variable will change independently fromother risk variable, there are usually interdependencies between risk variables. However thesensitivity analysis disclosed below does not take into account the interdependenciesbetween risk variables.
a. Foreign currency riskThe Company�s exposure to the risk of changes in foreign exchange rates relatesprimarily to the Company�s operating activities (when revenue or expense aredenominated in a different currency from the Company�s functional currency) and theCompany�s net investments in foreign subsidiaries.
The Company reviews its assets and liabilities denominated in foreign currency andenters into forward exchange contracts to hedge the exposure from exchange ratefluctuations. The level of hedging depends on the foreign currency requirements fromeach operating unit. As the purpose of holding forward exchange contracts is to hedgeexchange rate fluctuation risk, the gain or loss made on the contracts from the fluctuationin exchange rates are expected to mostly offset gains or losses made on the hedged item.Hedge accounting is not applied as they did not qualify for hedge accounting criteria.Furthermore, as net investments in foreign subsidiaries are for strategic purposes, theyare not hedged by the Company.
MediaTek Inc. | 2014 Annual Report F-170
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
The foreign currency sensitivity analysis of the possible change in foreign exchange rateson the Company�s profit is performed on significant monetary items denominated inforeign currencies as of the end of the reporting period. The Company�s foreign currencyrisk is mainly related to the volatility in the exchange rates for USD. The information ofthe sensitivity analysis is as follows:
When NTD appreciates or depreciates against USD by 1 cent, the profit for the yearsended December 31, 2014 and 2013 decreases/increases by NT$1,790 thousand andNT$1,370 thousand.
b. Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financialinstrument will fluctuate because of changes in market interest rates. The Company�sexposure to the risk of changes in market interest rates relates primarily to theCompany�s loans and receivables at variable interest rates, bank borrowings with fixedinterest rates. Moreover, the market value of the Company�s investment in credit-linkeddeposits are affected by interest rate. The market value would decrease (even lower thanthe principal) when the interest rate increases, and vice versa. The market values ofexchange rate-linked deposits are affected by interest rates and changes in the value andvolatility of the underlying. The following sensitivity analysis focuses on interest raterisk and does not take into account the interdependencies between risk variables.
The interest rate sensitivity analysis is performed on items exposed to interest rate risk asof the end of the reporting period, including investments with variable interest rates. Atthe reporting date, an increase/decrease of 10 basis points of interest rate in a reportingperiod could cause the profit for the years ended December 31, 2014 and 2013 toincrease/decrease by NT$10 thousand and NT$477 thousand, respectively.
c. Other price riskThe Company�s listed and unlisted equity securities are susceptible to market price riskarising from uncertainties about future values of the investment securities. TheCompany�s listed equity securities are classified under available-for-sale financial assets.The Company manages the equity price risk through diversification and placing limits onindividual and total equity instruments. Reports on the equity portfolio are submitted tothe Company�s senior management on a regular basis. The Company�s Board ofDirectors reviews and approves certain equity investments according to level ofauthority.
MediaTek Inc. | 2014 Annual Report F-171
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
A change of 1% in the price of the listed equity securities classified underavailable-for-sale could only impact the Company�s equity and cause the othercomprehensive income for the years ended December 31, 2014 and 2013 toincrease/decrease by NT$46,927 thousand and NT$44,102 thousand, respectively.
B. Credit risk managementCredit risk is the risk that counterparty will not meet its obligations under a contract,leading to a financial loss. The Company is exposed to credit risk from operating activities(primarily for trade receivables) and from its financing activities, including bank depositsand other financial instruments.
Customer credit risk is managed by each business unit subject to the Company�s establishedpolicy, procedures and controls relating to customer credit risk management. Credit limitsare established for all customers based on their financial position, rating from credit ratingagencies, historical experience, prevailing economic condition and the Company�s internalrating criteria, etc. Certain customer�s credit risk will also be managed by taking creditenhancing procedures, such as requesting for prepayment.
As of December 31, 2014 and 2013, receivables from top ten customers represented 84.49%and 93.97% of the total trade receivables of the Company, respectively. The creditconcentration risk of other accounts receivables was insignificant.
The Company�s exposure to credit risk arises from potential default of the counter-party orother third-party. The level of exposure depends on several factors including concentrationsof credit risk, components of credit risk, the price of contract and other receivables offinancial instruments. Since the counter-party or third-party to the foregoing forwardexchange contracts are all reputable financial institutions, management believes that theCompany�s exposure to default by those parties is minimal.
Credit risk of credit-linked deposits and convertible bonds arises if the issuing banksbreached the contracts or the debt issuer could not pay off the debts; the maximum exposureis the carrying value of those financial instruments. Therefore, the Company minimized thecredit risk by only transacting with counter-party who is reputable, transparent and in goodfinancial standing.
MediaTek Inc. | 2014 Annual Report F-172
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
C. Liquidity risk managementThe Company�s objective is to maintain a balance between continuity of funding andflexibility through the use of cash and cash equivalents, highly liquid equity investmentsand bank borrowings. The table below summarizes the maturity profile of the Company�sfinancial liabilities based on the contractual undiscounted payments and contractualmaturity. The payment amount includes the contractual interest. The undiscounted paymentrelating to borrowings with variable interest rates is extrapolated based on the estimatedinterest rate yield curve as of the end of the reporting period.
Non-derivative financial instrumentsLess than 1 year 1 to 5 years Total
As of December 31, 2014Borrowings $ 30,314,097 $ - $ 30,314,097Trade payables (including related parties) 7,171,345 - 7,171,345Other payables 26,703,711 - 26,703,711Long-term payables 38,062 53,920 91,982Total $ 64,227,215 $ 53,920 $ 64,281,135
As of December 31, 2013Borrowings $ 8,996,735 $ - $ 8,996,735Trade payables (including related parties) 7,256,336 - 7,256,336Other payables 13,536,137 - 13,536,137Total $ 29,789,208 $ - $ 29,789,208
Derivative financial instrumentsLess than 1 year 1 to 5 years Total
As of December 31, 2014Gross settlement
Forward exchange contractsInflow $ 1,899,065 $ - $ 1,899,065Outflow (1,903,080) - (1,903,080)Net (4,015) - (4,015)
Total $ (4,015) $ - $ (4,015)
MediaTek Inc. | 2014 Annual Report F-173
English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.
NOTES TO FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)
Less than 1 year 1 to 5 years TotalAs of December 31, 2013
Gross settlementForward exchange contracts
Inflow $ 590,400 $ - $ 590,400Outflow (599,000) - (599,000)Net $ (8,600) $ - $ (8,600)
Net settlementForward exchange contracts (25,930) - (25,930)
Total $ (34,530) $ - $ (34,530)
The table above contains the undiscounted net cash flows of derivative financialinstruments.
(3) Significant assets and liabilities denominated in foreign currenciesInformation regarding the significant assets and liabilities denominated in foreign currenciesis listed below:
December 31, 2014 December 31, 2013Foreign
Currency(thousand)
Exchangerate
NT$(thousand)
ForeignCurrency
(thousand)Exchange
rateNT$
(thousand)
Financial assetsMonetary item:
USD $ 1,493,866 $ 31.718 $ 47,382,443 $ 800,745 $ 29.950 $ 23,982,303
CNY $ 385,235 $ 5.113 $ 1,969,519 $ 3,000 $ 4.947 $ 14,841
Financial liabilitiesMonetary item:
USD $ 1,314,906 $ 31.718 $ 41,706,176 $ 663,702 $ 29.950 $ 19,877,863
CNY $ 361,150 $ 5.113 $ 1,846,383 $ 120 $ 4.947 $ 594
(4) Capital managementThe primary objective of the Company�s capital management is to ensure that it maintains astrong credit rating and healthy capital ratios in order to support its business and maximizeshareholder value. The Company manages its capital structure and makes adjustments to it,in light of changes in economic conditions. To maintain or adjust the capital structure, theCompany may adjust dividend payment to shareholders, return capital to shareholders orissue new shares.
MediaTek Inc. | 2014 Annual Report F-174
MediaTek Inc. | 2014 Annual Report 115
8. Status in
Cases where the Company or its Affiliates have
Financial Difficulties
None